Canola futures fairly steady even with bigger crop estimate

Crop futures drifted a little lower on Friday, given the dominant market sentiment that supplies of the major grain and oilseeds are ample.

But even while Statistics Canada this week increased its estimate of the canola crop by eight percent to 21.3 million tonnes compared to September estimate, canola futures have barely budged over the week.

January closed at $505.10 per tonne, down 80 cents and March closed at $513.60, down 70 cents.

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The biggest factor this week was actually the change in the value of the loonie.

It dropped down below US78 cents again, down about one cent from where it was in early December and that helped to support canola futures.

Compared to the previous Friday, the January canola contract lost only $1 and March fell only 60 cents.

And it should be noted that new crop November 2018 actually edged up by $3.60 over the week to $506.60.

CANOLA SUPPLY NOT BURDENSOME

The move up to a record 21.3 million tonnes might have surprised some, but given the strong demand so far this year, the market should be able to handle the volume

With the new numbers from StatsCan we have total canola supply of about 22.8 million tonnes (21.3 million tonnes of production, 1.35 million tonnes of carry in and about 100,000 tonnes of imports.)

Operating under the previous September StatsCan report, Agriculture Canada’s November supply and demand forecast pegged total supply at 21.16 million tonnes.

Exports were at 11 million tonnes, the same as last year, the domestic crush was at nine million tonnes, down two percent, and feed, waste and seed was at 105,000 tonnes. It forecast the year-end stocks at a tight one million tonnes.

Now we have a new, larger supply, but Agriculture Canada should also probably raise its demand forecast,

Exports to date are running 12.5 percent ahead of last year. Domestic crush is about equal to last year’s pace.

Let’s say exports can’t keep up the heady pace for the whole year and wind up 10 percent ahead of last year.

That would put them at 12.1 million tonnes, or 1.1 million ahead of the November forecast. The crush could easily be 100,000 more than the November forecast.

So, we have 1.9 million tonnes more canola than in November but demand could be about 1.2 million more. So you might have ending stocks at 1.7 million tonnes instead of 1.0 million.

But 1.7 million is not onerous. The average for the previous five years is 1.92 million.

SOUTH AMERICAN CROP CONDITIONS

So if canola supply is not a burden, what will be the major price drivers? Competing oilseeds and the value of the loonie will be big factors.

This week crop market reports from the major news wires have focused a lot on dry conditions in Argentina and the potential for the La Nina in the Pacific Ocean to continue to limit rain in that country.

But I think there has not been enough attention paid to what appear to be good conditions in Brazil that could offset any shortfalls in Argentina.

Today consultancy AgRural raised its forecast for 2017-18 Brazil soybean production to 112.9 million tonnes from 110.2 million.

Also, beneficial rain is forecast for the coming weak in parts of Argentina.

Palm oil is another competitor and production is expected to rise in 2018.

CANADIAN DOLLAR

The loonie is back below US78cents, but could it go lower?

Analysts at RBC think so. There is growing speculation that the U.S. Federal Reserve will raise US interest rates by 25 basis points when it meets Dec. 13, while the Bank of Canada kept its rate steady this month.

The expectation that the U.S. Republicans will be able pass a major budget cut has markets down south giddy, hoping for continues strong economic performance.

Canada’s economy is also doing well but the uncertainty over NAFTA negotiations has the Bank of Canada reluctant to raise rates and also has investors shying away from the loonie.

So likely the loonie will continue somewhere in the mid 70s in the next couple of months, unless there is an unexpected shock in oil prices or rapid success in NAFTA talks.

RBC sees the loonie at 75 cents in the first quarter.

But many analysts expect that the loonie should firm in the second quarter and the rest of 2018, particularly if NAFTA uncertainty clears and the Bank of Canada does start raising its interest rate.

CANOLA CRUSH

Crushers processed 196,846 tonnes of the oilseed, up 5.7 percent on the week. That represented a strong 88.8 percent of capacity.

To date, 3.204 million tonnes have been crushed, down about one percent from last year’s 3.247 million tonnes.

EXPORTS

Canada exported 193,000 tonnes of canola in week 18, to Dec. 3, down from 214,000 tonnes the week before, said the Canadian Grain Commission.

To date, canola exports are 3.6 million tonnes, up 12.5 percent from 3.2 million last year at the same time.

Overall, total grain and oilseed exports for the week got back up over a million tonnes.

It was a huge week for soybean exports with 343,300 tonnes shipped. It would not surprise me to learn that was a record soybean shipment for a single week.

However, soybean exports to date are a little behind last year’s pace for the year.

Wheat shipments totalled 412,000 tonnes in the week, up from 351,600 tonnes the week before.

For the year so far, wheat exports are about 5.5 million tonnes, up 9.5 percent from 5.02 million last year.

Almost no peas were exported in the week but 20,500 tonnes of lentils were shipped. For the year, pulse exports are way down because India is not importing.

OUTSIDE MARKETS

Light crude oil nearby futures in New York were up 67 cents at US$57.36 per barrel.

In the afternoon, the Canadian dollar was trading around US77.73 cents, down from 77.80 cents the previous trading day. The U.S. dollar was C$1.2865.

The Toronto Stock Exchange’s S&P/TSX composite index closed up 80.39 points, or 0.5 percent, at 16,096.07.

The monthly U.S. jobs report was viewed favourably. The unemployment rate remained at a low 4.1 percent

The Dow Jones Industrial Average rose 117.68 points, or 0.49 percent, to 24,329.16, the S&P 500 gained 14.52 points, or 0.55 percent, to 2,651.5 and the Nasdaq Composite added 27.24 points, or 0.4 percent, to 6,840.08.

For the week, the TSX was up 0.32 percent, the Dow rose 0.4 percent, the S&P advanced 0.35 percent and the Nasdaq fell 0.11 percent.

 

Winnipeg ICE Futures Canada dollars per tonne.

Canola Jan 2018   505.10   -0.80   -0.16%

Canola Mar 2018   513.60 -0.70   -0.14%

Canola May 2018   520.60   -0.60   -0.12%

Canola Jul 2018   524.00   -0.50   -0.10%

Canola Nov 2018   506.60   -1.10   -0.22%

 

American crop prices in cents US/bushel, soybean meal in $US/short ton, soy oil in cents US/pound.

Chicago

Soybeans Jan 2018   989.75   -2.25   -0.23%

Soybeans Mar 2018   1001.50   -2.75   -0.27%

Soybeans May 2018   1012.25   -2.50   -0.25%

Soybeans Jul 2018   1021.00   -2.25   -0.22%

Soybeans Aug 2018   1022.00   -2.00   -0.20%

Soybeans Sep 2018   1013.00   -1.00  -0.10%

 

Soybean Meal Dec 2017   330.00   -3.50   -1.05%

Soybean Meal Jan 2018   331.70   -3.50   -1.04%

Soybean Meal Mar 2018   335.70   -3.10   -0.91%

 

Soybean Oil Dec 2017   33.54   +0.29   +0.87%

Soybean Oil Jan 2018   33.62   +0.29   +0.87%

Soybean Oil Mar 2018   33.79   +0.25   +0.75%

 

Corn Dec 2017   340.00   +1.25   +0.37%

Corn Mar 2018   352.75   +1.25   +0.36%

Corn May 2018   361.00   +1.00   +0.28%

Corn Jul 2018   369.25   +0.75   +0.20%

Corn Sep 2018   376.50   +1.00   +0.27%

 

Oats Dec 2017   226.25   -2.75   -1.20%

Oats Mar 2018   242.00   -3.00   -1.22%

Oats May 2018   248.25   -3.50   -1.39%

Oats Jul 2018   256.25   -4.00   -1.54%

Oats Sep 2018   256.00   -6.25   -2.38%

 

Wheat Dec 2017   392.00   -2.25   -0.57%

Wheat Mar 2018   419.00   -2.50   -0.59%

Wheat May 2018   432.25   -2.75   -0.63%

Wheat Jul 2018   445.75   -3.25   -0.72%

Wheat Sep 2018   459.75   -4.00   -0.86%

 

Minneapolis

Spring Wheat Dec 2017   597.75   -1.00   -0.17%

Spring Wheat Mar 2018   611.25   +0.25   +0.04%

Spring Wheat May 2018   619.75   +0.25   +0.04%

Spring Wheat Jul 2018   624.00   +0.25   +0.04%

Spring Wheat Sep 2018   621.25   -0.75   -0.12%

 

Kansas City

Hard Red Wheat Dec 2017   400.75   -2.25   -0.56%

Hard Red Wheat Mar 2018   418.00   -2.75   -0.65%

Hard Red Wheat May 2018   431.00   -2.75   -0.63%

Hard Red Wheat Jul 2018   447.00   -3.00   -0.67%

Hard Red Wheat Sep 2018   462.50   -3.75   -0.80%

 

Chicago livestock futures in US¢/pound, Pit trade

Live Cattle (P) Dec 2017   115.58   -0.05   -0.04%

Live Cattle (P) Feb 2018   118.30   -0.38   -0.32%

Live Cattle (P) Apr 2018   120.20   +0.10   +0.08%

 

Feeder Cattle (P) Jan 2018   145.22   -1.10   -0.75%

Feeder Cattle (P) Mar 2018   143.32   -1.18   -0.82%

Feeder Cattle (P) Apr 2018   143.65   -0.97   -0.67%

 

Lean Hogs (P) Dec 2017   63.68   +0.10   +0.16%

Lean Hogs (P) Feb 2018   68.85   +0.38   +0.55%

Lean Hogs (P) Apr 2018   73.12   +0.72   +0.99%