Early canola gains collapse at close, big crop expectations offset Midwest dryness

After starting out strong early, following soybeans, canola lost ground during the day and collapsed late to close slightly down in the nearby contract.

The prospect of a large Canadian canola crop caused traders to wonder about the need to chase prices higher. Also, although soybeans rallied strongly, soy oil did not. November soybeans closed the day up 2.15 percent, December soy meal was up 3.59 percent and December soy oil was down 0.23 percent.

Commercial hedging also pressured the canola market.

Aside from an area on the Iowa-Nebraska border, the quantity and coverage of rain over the Midwest on the weekend was disappointing, keeping much of the U.S. soybean crop in stress.

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Overnight trade pushed soybeans and canola sharply higher, with canola up $12 per tonne at one point, but once the day trade began price fell from their highs.

Corn and wheat fell. They have no independent strength due to the perception that global stocks will be adequate this year. The beginning of harvest in the southern U.S. put some corn on the cash market and caused cash basis to crash.

The afternoon crop condition ratings from the USDA came in as expected. Soybean good to excellent percentage fell to 54 from 58 last week. Corn good to excellent fell one percentage point to 56.

The dry weather through the long weekend in Western Canada allowed good progress on the start of harvest. A drive through west central Saskatchewan showed lots of canola swathes.

Forecasts show more warm, dry weather in Western Canada through to the coming weekend when the chance for showers develops, mostly in southern parts of the Prairies. See forecast here.

Lower temperatures are forecast for Sept. 10-11 but The Weather Network long range forecast still has lows well above the freezing point in most Prairie points.

On Friday Environment Canada updated its monthly temperature forecast and it shows September being warmer than normal.

It is dry in Argentina where the wheat crop is being seeded. It will need rain in the next few weeks to avoid germination problems.

It has also turned dry in parts of the U.S. winter wheat region (Nebraska and western Kansas.) Wheat seeding is still several weeks away but if it stays dry that could start to provide modest support to wheat values.

Changes to the Canada Grains Act that came into force with the new crop year have ended the Canadian Grain Commission’s ability to tack grain exports. The CGC is working with grain companies to work out a new system where the companies will report exports to the CGC and it might be several weeks yet before we know how the early grain export season is progressing.

Markets generally remained on edge over the United States’ plan to punish Syria for allegedly using chemical weapons. The U.S. military is planning missile attacks but president Barrack Obama is seeking congressional approval before ordering strikes.

Winnipeg ICE Futures Canada dollars per tonne

Canola Nov 2013 522.20 -0.10 -0.02%

Canola Jan 2014 528.10 +0.40 +0.08%

Canola Mar 2014 532.80 +0.30 +0.06%

Canola May 2014 536.80 +0.30 +0.06%

Canola Jul 2014 539.00 unch 0.00%

Milling Wheat Oct 2013 254.00 unch 0.00%

Milling Wheat Dec 2013 259.00 unch 0.00%

Milling Wheat Mar 2014 264.00 -1.00 -0.38%

Durum Wheat Oct 2013 280.00 unch 0.00%

Durum Wheat Dec 2013 282.00 unch 0.00%

Durum Wheat Mar 2014 289.00 unch 0.00%

Barley Oct 2013 189.00 unch 0.00%

Barley Dec 2013 194.00 unch 0.00%

Barley Mar 2014 194.00 unch 0.00%

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

Chicago

Soybeans Sep 2013 1435.5 +11.5 +0.81%

Soybeans Nov 2013 1386.75 +29.25 +2.15%

Soybeans Jan 2014 1385 +30.25 +2.23%

Soybeans Mar 2014 1358.25 +24 +1.80%

Soybeans May 2014 1327.75 +16 +1.22%

Soybeans Jul 2014 1322 +14.25 +1.09%

Soybean Meal Sep 2013 485.4 +17.2 +3.67%

Soybean Meal Oct 2013 443.5 +15.1 +3.52%

Soybean Meal Dec 2013 438.9 +15.2 +3.59%

Soybean Oil Sep 2013 43.82 -0.07 -0.16%

Soybean Oil Oct 2013 43.9 -0.07 -0.16%

Soybean Oil Dec 2013 44.19 -0.1 -0.23%

Corn Sep 2013 498 +3 +0.61%

Corn Dec 2013 475.25 -6.75 -1.40%

Corn Mar 2014 488 -6.5 -1.31%

Corn May 2014 496 -6.5 -1.29%

Corn Jul 2014 502.25 -6.5 -1.28%

Oats Sep 2013 379 -12.5 -3.19%

Oats Dec 2013 330 -10.5 -3.08%

Oats Mar 2014 332 -9.75 -2.85%

Oats May 2014 333.25 -11 -3.20%

Oats Jul 2014 324.25 -11 -3.28%

Wheat Sep 2013 636.5 -6.75 -1.05%

Wheat Dec 2013 647.25 -6.75 -1.03%

Wheat Mar 2014 658.75 -6.75 -1.01%

Wheat May 2014 666 -6.75 -1.00%

Wheat Jul 2014 660.25 -6.25 -0.94%

Minneapolis

Spring Wheat Sep 2013 703.75 -16.5 -2.29%

Spring Wheat Dec 2013 725 -5.25 -0.72%

Spring Wheat Mar 2014 735.5 -6.25 -0.84%

Spring Wheat May 2014 743.75 -7 -0.93%

Spring Wheat Jul 2014 749.5 -7.75 -1.02%

Kansas City

KCBT Red Wheat Sep 2013 696.75 -4 -0.57%

KCBT Red Wheat Dec 2013 699 -4.5 -0.64%

KCBT Red Wheat Mar 2014 706.75 -4.25 -0.60%

KCBT Red Wheat May 2014 711.5 -4.25 -0.59%

KCBT Red Wheat Jul 2014 702 -5.75 -0.81%

Light crude oil nearby futures in New York rose 89 cents at $108.54 US per barrel.

The Canadian dollar at noon was 94.94 cents US, up from 94.76 cents the previous trading day. The U.S. dollar at noon was $1.0533 Cdn.

Canadian telecom company share rose after Verizon announced a deal to buy a giant British phone network and said it was not interested in expanding into Canada. That helped lift the TSX composite, as did reports showing stronger-than-expected data on U.S. manufacturing and construction spending.

In early tallies —

The Toronto Stock Exchange’s S&P/TSX composite index rose 86.60 points, or 0.68 percent, closing at 12,740.50.

The Dow Jones industrial average was up 23.42 points, or 0.16 percent, at 14,833.73.

The Standard & Poor’s 500 Index rose 6.76 points, or 0.41 percent, at 1,639.73.

The Nasdaq Composite Index was up 22.74 points, or 0.63 percent, closing at 3,612.61.