CNS Canada –– Canola futures on the ICE Futures Canada trading platform were weaker during the week ended Wednesday, as the large Canadian supply situation continued to overhang the market.
A pickup in farmer selling, as improving basis levels started to make cash prices more attractive in some regions, was also responsible for the weakness. Farmers were also said to be selling to generate cash flow ahead of spring seeding.
Expectations of large Canadian canola carryout stocks were also bearish and should continue to weigh on the market going forward, said Jon Driedger, market analyst with FarmLink Marketing Solutions in Winnipeg.
Agriculture and Agri-Food Canada expects Canadian canola carryout stocks to total 3.3 million tonnes in 2013-14, a dramatic increase from just 608,000 tonnes in 2012-13.
“If you look at where the carryout is likely to be, you maybe view the market as being vulnerable,” said Driedger. “At the same time, we had some strength in the bean oil over the last day or two on the extension of the biodiesel tax credit in the U.S.”
The market, he said, is looking for some fresh news and is likely to be pulled in both directions by a number of factors going forward.
There is some optimism about rail movement improving, helping more grain reach its destination in Canada, which could be supportive for canola. But just because rail movement is getting a little better doesn’t mean the problem is solved or gone away, Driedger added.
Expectations that Canadian canola acreage will increase by about a million tonnes this spring compared to last year will also be bearish, industry members said.
In 2013-14, 19.94 million acres of canola were seeded by Canadian growers, Statistics Canada data shows. About 21 million acres expected to be planted this spring.
But on the other side, traders may start to build a weather premium into the futures. Driedger said there are some concerns about the late spring, but it’s still a bit too early to get extremely worried about it.
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.