Winnipeg (CNS Canada) – ICE Futures Canada canola contracts saw some choppy activity over the course of the week ended March 16, but trended higher overall with much of the relative strength coming from weakness in the Canadian dollar.
The currency fell by about 1.5 cents relative to its U.S. counterpart over the course of the week, which helped keep crush margins steady despite a C$10 rise in the futures. The currency ended the week trading just above 76 U.S. cents, which is well below the 80 cent mark it was trading at back in mid-February.
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The weaker currency should also encourage export demand, although canola exports are starting to lag the year-ago pace with transportation issues across the Prairies leading to a backlog at the West Coast. Canada has exported 6.4 million tonnes of canola during the crop-year-to-date, according to the latest Canadian Grain Commission data. That compares with 6.6 million tonnes at the same point the previous year.
Global trade uncertainty received a fair bit of play in the agricultural markets during the week, and should be something to watch going forward. U.S. President Donald Trump is a known wildcard, with his recent threats of tariffs on steel and aluminum railing concerns over China placing retaliatory tariffs on soybeans and corn. NAFTA negotiations are ongoing as well, and Canada is very much caught up in the reality show going on south of the border.
As far as the actual market fundamentals are concerned, the dire drought situation in Argentina is still not old news. Both soybean and corn production estimates out of the country keep being revised lower, and any rain now is unlikely to do much for yields. Crop problems there open the door for U.S. soybean and corn exports, keeping the futures well supported.
Argentina finally saw some moisture. While crop prospects are unlikely to improve, they should at least stabilize the crops and both soybeans and corn were down sharply on Monday morning, March 19.
Dryness in the U.S. Plains kept the wheat futures somewhat supported during the week as well, although there was enough moisture in the forecast to see values drift lower. Improving production prospects out of Russia and Ukraine were also weighing on wheat.
That rain hit over the weekend (March 17-18) and wheat futures were down sharply on March 19. Winter wheat is only just starting to come out of dormancy in the southern U.S. Plains, and there’s a long season ahead for wheat crops to be made and lost a few times over.
