Tuesday market wrap: canola rallies

The hot weather outlook for the next two weeks with little rain other than thunderstorms is raising concerns across the Canadian Prairies.

With U.S. markets closed Tuesday for the Independence Day holiday the canola market did a little catch up for when it was closed on Monday.

New crop November rose back above $500 for the first time since May 24.

Gains were limited by a half-cent rally in the Canadian dollar. Also the widening basis is limiting the effect on the cash price.

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The day’s high for the November futures was at $507.70, but the contract closed at $504.80, up $6.80 or 1.37 percent.

Over the past five days the contract has gained $30.70 or 5.6 percent.

Soybeans were closed today but to the end of trade on Monday they had risen 7.3 percent over the previous five days.

WEATHER

The weather is dominating market talk.

The drought gripping the U.S. northern Plains is threatening to spread into Canada and the U.S. Midwest.

Broadly speaking, the Midwest had fair weather so far this growing season although corn is behind normal development.

It will be pollinating in mid July and the outlook for July 12-20 is for little rain in Iowa and the rest of the western corn belt and there is a stronger than normal probability of above normal temperatures.

If this forecast proves true, it could get the corn market on the move. And when corn is rising, it tends to add momentum to all crop prices.

The hot dry weather in much of the Canadian Prairies as canola is flowering could also limit yields and support the price of the oilseed.

AUSTRALIA

The growing region of Western Australia is also in severe drought. It got a little rain in the past seven days, but not enough to significantly change the situation for the better.

It is a region that tends to produce eight to 10 million tonnes of wheat and about a million tonnes of canola.

The National Australia Bank is the first forecaster to start trimming national forecasts because of the drought in the west. It now pegs Australian wheat production at 23.3 million tonnes. The Australian government forecaster last month put the crop at 24.19 million tonnes.

Expect further cuts.

Farmers in Western Australia are using photos of current crop conditions compared to last year to illustrate the severe reductions.

Australian broadcaster ABC has this story:

Now and then photos show just how dry Western Australian agricultural region is

OUTSIDE MARKETS

In the afternoon, the Canadian dollar was trading around US77.27 cents, up from 76.84 cents the previous trading day. The U.S. dollar was C$1.2942.

The Toronto Stock Exchange composite closed down 51.58 points or 0.34 at 15,130.61.

Winnipeg ICE Futures Canada dollars per tonne

Canola Nov 2017 504.80 +6.80 +1.37%

Canola Jan 2018 510.30 +6.70 +1.33%

Canola Mar 2018 515.80 +6.60 +1.30%

Canola May 2018 518.80 +6.10 +1.19%