By Phil Franz-Warkentin and Marney Blunt, Commodity News Service Canada
July 18, 2014
Winnipeg – ICE Futures Canada canola contracts dropped sharply lower on Friday, as losses in outside oilseed markets and ideas that recent gains were overdone weighed on prices ahead of the weekend.
Declines in the European rapeseed market put some spillover pressure on canola, while a turn lower in CBOT soybeans following early gains was also bearish, according to participants. Speculators were some of the noted sellers, adding to their short positions as the nearby chart signals remain bearish.
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Light farmer selling was said to be coming forward on Friday, although most producers are still on the sidelines waiting to get a firmer sense on the size of this years crop.
Improving weather conditions in some parts of Western Canada weighed on values as well, but there were also still more than enough areas of concern to provide some underlying support.
Gains in CBOT soyoil also helped temper the declines.
About 17,011 canola contracts were traded on Friday, which compares with Thursday when 14,625 contracts changed hands. Spreading accounted for 10,074 of the contracts traded.
Milling wheat, durum, and barley were all untraded.
SOYBEAN futures in Chicago were mixed on Friday due to non-threatening weather conditions but good export demand providing support, analysts say.
Soybean prices were initially supported by the release of a report from the U.S. Department of Agriculture (USDA), saying that U.S. exporters had sold 116,000 metric tonnes of soybeans to China for the 2014-15 season that begins September 1. The USDA also reported a 2014-15 sale of 464,000 metric tonnes to unknown destinations, which analysts think is also bound for China.
While the export news indicates a healthy demand for soybeans, the upswing in futures prices wouldn’t be sustained for long since many traders had already anticipated foreign buyers would acquire the beans and adjusted investments accordingly, brokers say.
Good weather in the U.S. Midwest contributed to crop potential.
SOYOIL futures in Chicago closed higher on Friday.
SOYMEAL futures closed lower on Friday, keeping the spread from soybean oil.
CORN futures in Chicago dropped on Friday as they were weighed down by forecasts for continued favourable weather in the U.S. Midwest and expectations for a second-straight bumper crop, analysts say.
About 76 per cent of the U.S. corn crop was rated as good or excellent earlier in the week, according to a report from the USDA. The warmer, drier weather forecast for next week has boosted the outlook for the corn crop, traders say.
So far this month temperatures across the Corn Belt have been running three to five degrees higher than normal, and forecasts are suggesting much of the same.
On Thursday, corn futures had settled higher for only the second time since June 30, due to the news of the Malaysian Airliner crash in Ukraine. The country is one of the world’s largest producers for corn and wheat.
WHEAT futures in Chicago lowered on Friday, after jumping on Thursday due to concerns over the Malaysian Airline crash near the Ukraine-Russia border, a top wheat and corn production area, brokers say.
The climb in prices was short-lived as traders dialled back expectation for intensified conflict in eastern Ukraine to significantly impact crop production and transport in the region, analysts say.
A lackluster foreign demand for U.S. wheat continues to weigh on prices. Traders say there may be a short-covering bounce if they don’t see disruptions in grain trade out of the Black Sea soon.
• Spain had reduced estimates of the country’s 2014 wheat crop to 5.5 million tonnes, down from the previous estimate of 5.9 million tonnes and down from 6.7 million tonnes of the crop in 2013.
• Analyst Strategie Grains raised its monthly outlook for wheat production in the European Union as it lifted yields for several countries, but cautioned that crop quality was unclear after a wet start to the summer.
• Egypt, the world’s top wheat importer, said on Thursday that reforms to its bread subsidy program alongside an improved storage system should cut its import needs by as much as 30 per cent.
Settlement prices are in Canadian dollars per metric ton.
