North American grain/oilseed review: Canola drops with soyoil

By Phil Franz-Warkentin

Glacier FarmMedia MarketsFarm — The ICE Futures canola market was weaker on Wednesday, as sharp losses in the Chicago soy complex spilled over to weigh on values.

Uncertainty over biodiesel policy in the United States accounted for much of the weakness in soybeans and soyoil, with European rapeseed and Malaysian palm oil futures also lower.

However, the underlying fundamentals remain supportive for canola, with tightening supply projections coupled with solid end user buying interest highlighting the need to ration demand going forward.

Weakness in the Canadian dollar also underpinned canola, as the currency dropped further below 70 U.S. cents.

There were an estimated 55,829 contracts traded on Wednesday, which compares with Tuesday when 60,272 contracts traded. Spreading accounted for 37,612 of the contracts traded.

SOYBEAN futures at the Chicago Board of Trade fell to their weakest levels in four years on Wednesday, with large South American crop prospects and uncertain biofuel policy in the United States weighing on values.

Weather conditions in Brazil and Argentina remain relatively favourable for crop development, with many industry participants upping their production estimates.

Meanwhile, the lack of direction on renewable diesel in the latest U.S. spending bill raised concerns over demand for soyoil.

Bearish chart signals contributed to the losses, with stops hit on the way down.

The USDA reported flash sales of 120,000 tonnes of soymeal to Colombia this morning, providing some support.

CORN futures followed soybeans lower, with the good South American crop prospects also bearish.

The USDA reported sales to Colombia of 135,000 tonnes of U.S. corn.

While renewable diesel was left out of the latest U.S. spending bill, the legislation would be beneficial for the corn-based ethanol sector — allowing for the year-round selling of gasoline with a higher level of ethanol blended in.

WHEAT was steady to lower. Declining crop estimates out of Russia were supportive, while expectations for larger crops elsewhere tempered that support.

The broad strength in the U.S. dollar internationally was also bearish, making U.S. wheat more expensive for global buyers.