Canola moves higher

Winnipeg – ICE futures canola contracts moved higher during the week ended Aug. 17, although the market remains range-bound overall with seasonal harvest pressure and the large U.S. soybean crop likely to temper the upside going forward.

From a chart-standpoint, the November contract remains stuck in a $50 range between C$475 and C$525 per tonne.

Statistics Canada releases its first survey-based production estimates of the crop year at the end of August, which should at least provide a starting point for discussions on the size of this year’s crop. However, given the timing of the survey, the excessive heat that hit a good portion of the Prairies in early August likely won’t be factored in to the data.

Agriculture and Agri-Food Canada released its own updated supply/demand tables on Aug. 17. The government agency left its canola production estimate for 2018/19 unchanged at 20.335 million tonnes, which would be down slightly from the 21.313 million tonnes grown the previous year. Carryout projections for both 2018/19 and the recently completed 2017/18 marketing year remain large at 2.250 million and 2.700 million tonnes respectively.

A cut to the eventual yields could lower those ending stocks. However, usually anything more than a million tonnes is considered ample as far as canola is concerned, so those big ending stocks numbers should keep end users from being that aggressive and could act as an anchor on prices going forward.

Crop conditions across the Midwest remain relatively favourable for soybean and corn development in the United States, and big crops south of the border may also keep a lid on any possible strength in canola.

The soybean market did get a boost during the week from news that a Chinese delegation is heading to Washington, D.C. later in the month. There are hopes that the low level talks will be a good step towards resolving the ongoing trade war between the two countries, although that remains to be seen.

Wheat futures have been on a bit of a roller-coaster in recent weeks, hitting multi-year highs at the beginning of August before retreating and then recovering again over the past week.

Serious production problems in a number of key wheat growing regions of the world, including Europe, Russia and Australia should be bringing more attention to North American wheat this year. Higher quality protein wheat could especially be in short supply, which may see the Minneapolis spring wheat futures grow their premium over the Chicago and Kansas City winter wheats.

However, seasonal harvest pressure and the fact that the U.S. winter wheat crop had higher protein levels this year tempered the upside potential in spring wheat.

Canada’s wheat harvest will soon pick up in earnest as well, with the latest from Agriculture Canada pegging all-wheat production at 30.300 million tonnes. That would be down by 300,000 tonnes from an earlier estimate, but still up from the 29.984 million grown the previous year. The month-on-month reduction was largely tied to a decline in the durum forecast, which is now pegged at 5.800 million tonnes. That compares with 6.100 million in July.

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