Glacier FarmMedia | MarketsFarm – Heat and a lack of moisture in parts of Western Canada likely cut into production prospects this year. However, any weather concerns have yet to find their way into the markets, with solid production prospects out of the United States weighing on values overall.
November canola futures hit a contract low of C$585.00 per tonne on Aug. 6, while domestic wheat bids fell to their lowest levels in years as the U.S. futures traded near their softest levels since 2020.
A lack of any significant weather threats across the Midwest was likely to keep the bias pointed lower in the U.S. soybean, corn and wheat futures until something changes the narrative, according to Sean Lusk of Walsh Trading in Chicago. Soybeans in the U.S. were rated 68 per cent good-to-excellent as of Aug. 5 by the U.S. Department of Agriculture, which compares with only 54 per cent at the same time the previous year. Corn was in similar shape at 67 per cent good-to-excellent, marking a 10-point improvement on the year.
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“There’s no story here to drive (futures) significantly higher… we need a story,” said Lusk, adding “if we turn hot and dry for the rest of the month that would bend this thing back up, but there’s nobody calling for that.” Even if it does turn dry, at this point of the growing season he noted soybeans were already setting pods and corn is past the pollination stage.
Eventually speculators will look to take profits and cover their short positions, but Lusk noted that every previous attempt at correcting higher was met with renewed selling and he expected a sustained rally was unlikely in the absence of fresh weather concerns.
While Western Canada also started the growing season on a relatively favourable footing, conditions have deteriorated – especially in parts of Alberta and Saskatchewan. The provincial crop report from Saskatchewan for the week ended Aug. 5 pointed to a decline in yield potential for many commodities.
“At one point we were looking at a record crop, but it’s probably closer to average now,” said Lawrence Klusa, president of Seges Markets in Winnipeg, pointing to the lack of rain in many growing regions over the past month. However, he added that the expectations for large U.S. soybean supplies, slow U.S. export sales, and weakness in crude oil were all weighing on the oilseed markets in general.
“There’s a recognition that canola will not be the crop it was, at least not what people thought it would be even a few weeks ago,” said MarketsFarm analyst Mike Jubinville.
However, “if canola has a problem, it’s a soybean problem not a canola problem,” said Jubinville adding “as long as the soybeans are sluggish it will be difficult to maintain a rally in canola.” He added that the 2023/24 canola crop was possibly understated by as much as 500,000 tonnes by Statistics Canada.
While the bearish influence of the soybean market was weighing on canola, the price weakness should be making Canadian exports look more competitive to international buyers. Problems with the rapeseed crop in Europe could also be supportive going forward, according to Klusa.
Wheat crops in Europe were also being hurt by excoff. Although, “for right now, there seems to be sufficient (wheat) supply relative to demand,” according to essive moisture, with the two Canadian analysts expecting the wheat market could be showing signs of leveling Jubinville.
“The upside potential is not great in the major crops, (but) there might be more hope in some of the special crops,” said Klusa pointing to pulses and durum as markets with possible room for some relative strength as Canada is a major player in the world markets for those commodities.
However, while durum should maintain a premium over spring wheat, he cautioned that prices were unlikely to see the same strength as they did a year ago.
