Glacier FarmMedia COVID-19 & the Farm

Canola market dips to rally, heat stress hits wheat crops

Photo: Thinkstock

CNS Canada – The ICE Canada canola market had a bit of a wild ride during the week ended July 28, with the November contract falling to its lowest level of the past month at one point before the brakes were hit on the drop and the market rallied $25 in three days.

Fund traders started the week sitting on a long position of about 30,000 contracts, and the early selling whittled that down to about 20,000 with some bearish chart signals adding to the declines.

However, concerns over hot and dry weather mounted as the week persisted, and those fundamental issues brought speculators back to the buy side. Heat warnings were in place for much of Alberta and Saskatchewan, which should cut into the yield prospects.

The jury is still out on the size of the yet-to-be-harvested-crop, but with expectations for a rather tight carryout best guesses say the market will need to work to ration about one million to two million tonnes of canola in the 2017/18 crop year.

With only a week left in the 2016/17 marketing year, the domestic crush just passed 9.0 million tonnes in the latest Canadian Oilseed Processors Association (COPA) report. That’s about 700,000 tonnes above the previous year’s total. The Canadian Grain Commission data out during the week placed canola exports-to-date at 10.7 million tonnes, also about 700,000 tonnes above the 2015/16 pace.

As much as concerns over heat stress are underpinning canola, the situation is thought to be even worse south of the border.

A crop tour of US spring wheat growing regions during the week placed average yields at 38 bushels per acre, which would compare with the average of about 46 the previous year. The crop tour didn’t account for the how many acres will be outright abandoned in the drought stricken regions of North Dakota and Montana.

Canadian wheat crops are also dealing with some heat stress, but hard red spring cash bids in the countryside still lost ground as the Canadian dollar rallied sharply.

The currency settled at 80.34 US cents on Friday, July 28, hitting its highest level in 25 months.

Soybeans and corn in the US are also in the midst of the summer weather trade, with the day-to-day forecasts dictating the direction of the market. Forecasts calling for some much needed rain and cooler temperatures were a bit bearish during the week, but both crops remain stuck in rather narrow trading ranges for the time being, with participants showing a reluctance to push values too far one way or the other until they get a better handle on production.

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