Canola futures dropped Thursday, pressured by speculator liquidations and strong commercial hedging.
November canola lost almost three percent over the past five days based on the start of harvest, thoughts that the crop has improved and weak exporter demand. Also, farmer deliveries have led to elevator company hedging.
Canola fell despite rising soybean prices Thursday, which were pulled higher by strong gains in wheat after the U.S. Department of Agriculture cut its world wheat production forecast more than expected.
However, soy oil and crude oil fell. Many commodities are struggling because of renewed worries about the potential for a double dip recession.
The stock market has fallen sharply in the last three days because of concerns about large U.S. unemployment and sluggish growth as well as indications that China’s growth is slowing.
The USDA report out this morning was notable mainly for cutting the world wheat production forecast by 15.3 million tonnes.
It lowered Russia’s crop by eight million tonnes, Ukraine by three million, Kazakhstan by 2.5 million and the European Union by 4.3 million.
It raised the U.S. crop by 1.3 million tonnes and Australia by one million tonnes.
The USDA said there is enough wheat in the United States and elsewhere to fill in for smaller Black Sea crops, and shortages should not develop.
It increased its outlook for U.S. spring wheat, soybeans and corn production.
However, the report was not seen as bearish because USDA also lowered its forecast for end-of-year stocks for wheat and corn and kept soybean stocks steady. It expects increased exports will more than outweigh the increase in production.
With the Black Sea region expected to be mostly out of the wheat export business, the USDA expects grain importers will have to turn to the U.S. for wheat and corn. Voracious demand from China will keep soybean stocks manageable.
The Reuters News Service reported that the U.S. lifted its restrictions on canola meal from Bunge’s canola crushing plant in Nipawin, Sask. Last year the U.S. Food and Drug Administration imposed restrictions on several Canadian crushers because of concerns about salmonella in the meal.
In Winnipeg, November canola fell $1.30 per tonne to $456.10 on 8,331 trades.
The January contract fell $1 to $458.60 on 1,377 trades.
The previous day’s best basis was unchanged at $18 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 fell to 45 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 95.84 cents US, up from $95.64 the previous trading day. The U.S. dollar at noon was $1.0434 Cdn.
Winnipeg barley was steady and untraded. October was $168 and December $180.
Chicago August soybeans rose 12.5 cents to $10.57 US per bushel. September rose 9.5 cents to $10.26. New crop November rose 13 cents to $10.285.
September oats rose 2.75 cents to $2.72 per bu. December oats rose three cents to $2.85 per bu.
In New York, crude oil for September delivery fell $2.28 to $75.74 per barrel.
