EU heat wave sparks canola, wheat rally

Canola futures soared Thursday, driven by ongoing concerns about the Canadian crop, a heat wave in Europe, a weaker loonie and stronger soybean prices.November reached the highest level in a year after breaching the $440 per tonne level on Wednesday. Canadian prices had to rise to catch up to soaring European levels.Soybeans rose largely on spillover support from a surging wheat market, but also a forecast for hot, dry weather in the U.S. Midwest in late July.Minneapolis September spring wheat jumped 29.25 cents to $6.125 US per bushel on the European heat and drought in Russia and Kazakhstan. But some traders questioned whether the wheat rally is sustainable given large stocks left over at the end of the current crop year and good production expected in the United States.European grain analysts Strategie Grain reduced the forecast of European grain production because of recent hot weather.It put soft wheat production at 129.5 million tonnes, down from 129.8 million last year. Its June forecast was 133.1 million tonnes.Durum was lowered to 8.3 million tonnes from 8.7 in June. Last year, it produced 8.3 million.Barley production was lowered to 54.1 million tonnes from 55.6 million in June. Last year, it produced 61.8 million.Oil World this week forecast the EU rapeseed crop would be 20.44 million tonnes, down from 21.6 million last year. A trader with Gleadell, a British grain merchant, said production might fall to less than 20 million tonnes.While Canada and Europe tally the damage, Australian canola growers are having one of the best years ever, but theirs is a relatively small crop in the global context. The Australian Oilseeds Federation today lifted its forecast by 70,000 tonnes to 2.29 million tonnes, up from 1.9 million tonnes last year. Western Australia, which had been dry, recently received rain. About half of Australia’s canola acreage is in Western Australia.In Winnipeg, November canola soared $13.20 per tonne to $455.60 on 12,223 trades.The January contract jumped $12.80 to $456.10 on 883 trades.The previous day’s best basis widened to $5 per tonne under the November contract in the par region, according to the Winnipeg ICE Futures daily report.The 14-day Relative Strength Index for November was 87 according to BarChart.com. The rule of thumb is an RSI of 30 indicates an over sold market and 70 indicates an over bought market.The Canadian dollar at noon was 96.13 cents US, down from 97.03 cents at noon the previous trading day. The U.S. dollar at noon was $1.0403.Winnipeg October barley was steady and untraded at $156.50 and December was $156.50.Chicago August soybeans rose 21.5 cents to $10.19 US per bu. September rose 25.75 cents to 10.01. New crop November rose 26 cents to $9.88.September oats rose 9.5 cents to $2.685 per bu. December oats rose 10 cents to $2.755 per bu. In New York, crude oil for August delivery fell 42 cents to $76.62 US per barrel.

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