ICE canola weekly outlook: Yields still up in the air

Winnipeg – ICE Futures canola contracts recovered off of nearby lows over the week ended Sept. 5, but failed to rise to the same extent as the product values as the commodity remains expensive compared to other oilseeds.

With the harvest underway across the Prairies, traders are focused on yield estimates and the size of the crop. Statistics Canada pegged production at 19.2 million tonnes in a report out on August 31, which would be well below the 21.3 million tonne crop grown the previous year.

“Estimating the canola crop is challenging at best,” said Ken Ball, of PI Financial in Winnipeg. “In the areas where the crops were fairly good, the yields are generally coming in above expectation, but there are fairly widespread areas where they didn’t have the moisture and yields are disappointing.”

“My guess right now is that the crop is bigger than the StatsCan estimate,” said Ball, noting that the August report is notoriously on the low side. “It’s just a question of what kind of damage the heat did in August.”

Statistics Canada also releases estimates of stocks, as of July 31, on Sep. 6. Trade estimates are generally in the 2.5 million tonne area, which would be well above the 1.3 million carryout from the previous year.

“In a year where the crop is uncertain, if the stocks came in a little on the light side it would certainly increase the nervousness of the market,” said Ball.

While Canadian supply/demand fundamentals should remain a major driver for canola, the Canadian market will also take plenty of direction from Chicago Board of Trade soybeans.

“The bean market is showing clearly that it has no ability to rally going into the USDA report,” said Ball.

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