Most-traded March canola RSH5 settled up $8 per metric ton at $619.80 (all figures throughout in Canadian dollars).

January canola RSF5 settled up $11.60 at $620, putting it at a slight inverse to March, suggesting strong nearby commercial interest. May canola RSK5 rose $6.70 to $625.40.

Canola’s rise comes as buyers have moved in while farmers have backed off sales. Farmers tend to sell less in the last weeks of December if their fiscal year ends on Dec. 31, and then sell more heavily in early January.

“The speculative trade, the small and the large speculative traders, are coming in here on the canola,” said trader Jerry Klassen of Resilient Capital. “With a bit of commercial demand and the speculative trade, along with limited farmer selling, it gave the market the room to have a strong close.”

Chicago Board of Trade soyoil futures BOv1 fell 0.89 per cent but stayed within a range holding since Dec. 18, and above 40 cents per pound.

MATIF rapeseed COMc1 rose gently through the daily session before shooting high into the close in thin trading. It rose 1.76 per cent for the day to close at $534.75 but hit $550 in late trading.

Malaysian palm oil futures FCPOc3 rose slightly, continuing the previous day’s reversal of a six-day downturn. POI/

The Canadian dollar stayed weak and under 70 cents in value versus the greenback as political uncertainty swirls around the federal Liberal government.

—Reporting by Ed White

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“Canola has been showing good independent strength,” said Ken Ball of PI Financial in Winnipeg on the recent runup in the market. He said commercial end users increasing their coverage and speculators covering short positions on expectations for weather issues accounted for some of the buying interest that took values to their nearby highs.

However, widespread rains across the Prairies saw the market take back some of that weather premium. Farmer selling also picked up on the recent strength.

“The uptrend in canola is still intact,” said Ball, although he added that the potential for a large carryout and likelihood of a good crop in 2024 could lead to problems with burdensome supplies.

Statistics Canada reported Tuesday that canola supplies in the country as of March 31, 2024, came in at 8.3 million tonnes, which was up by about 1.3 million tonnes from the same point the previous year. Agriculture and Agri-Food Canada is currently forecasting ending stocks for 2023/24 of 2.0 million tonnes, but the current slow export pace could see that number increase.

From a chart standpoint, November canola is facing an upside target of C$700 per tonne, according to Ball. While the favourable weather conditions may limit the upside potential, activity in outside markets, such as soyoil, could provide support. European rapeseed has also stayed strong recent, due to cold and wet conditions for the crops there.

—Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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“The general trend is still pointing downward, but we’ve been hovering around this C$600 level for a month now,” said commodities investment advisor David Derwin of PI Financial in Winnipeg.

“It’s getting closer, but perhaps not quite yet,” said Derwin on whether the lows were in yet, adding that if values managed to stabilize around the C$600 per tonne level for another month he would be more confident that the downtrend was broken.

The May contract traded just above the C$600 per tonne mark on March 6, but settled slightly below that level at C$598.90 per tonne.

While increased farmer selling on any moves higher would keep a lid on the upside, Derwin noted that many producers were already well sold on their canola. Supportive seasonal price trends, such as weather news during the spring planting season, also often underpin values at this time of year.

Statistics Canada releases its first planting expectations for the upcoming growing season on March 11, with average pre-report expectations calling for a slight decline in seeded canola area from the 22.1 million acres planted in 2023. However, opinions are divided, and some analysts expect canola area could still be up on the year.

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As of March 28, the net managed money short position in canola futures came in at 63,005 contracts (79,922 short/16,917 long), a decrease of about 12,000 contracts from the previous week.

Open interest in the canola market came in at 296,705 contracts on March 28, which was down by about 14,000 from the previous week.

An analyst expected to see more fund selling over the next few weeks, especially given the recent rally in crude oil, as fund traders will want to exit the May contract ahead of its expiry.

At the Chicago Board of Trade, fund traders were holding a net long of about 98,400 contracts in soybeans which was down by 13,000 from the previous week. Meanwhile, corn was showing a net short of about 13,400, which was down by 32,000 from the previous week.

In wheat, the Chicago soft wheat market reported a net short position of about 92,600 contracts. The fund position in Kansas City wheat was near even money, after showing a net short of about 10,000 the previous week. In Minneapolis, the fund position was also balanced, with managed money traders holding close to 11,000 contracts on either side of the market to post a net long of 278 contracts.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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Canola, he explained, has generally done the opposite of the Chicago soy complex — which the Canadian oilseed normally follows.

‘ICE canola’s May contract on Tuesday lost about $38 per tonne at one point, he noted, and while it regained a good amount of strength, closing with a $9 loss, the soy complex remained weaker.

“Canola is really a dysfunctional future right now,” Palmer said.

“The funds of course are long on canola. They got spooked. They liquidated a good chunk of their position yesterday.”

There has also been very little farmer selling, according to Palmer. Farmers are essentially out of old-crop canola, but are holding back about 10 to 20 per cent of it in hopes of cash prices hitting $30 per bushel. Price and Data Quotes cited cash prices between $24-$25 per bushel on Wednesday.

Also, he said, only the locals and the algorithms were playing the market — and commercials were not trading, for the most part.

“[They] will only if they buy from the farmers and put in a hedge,” Palmer said, noting the commercials weren’t speculating on the spreads or the flat price.

No one wants to get caught short, he said, especially with such record-high prices for canola.

“There still could be a tremendous squeeze on the July/November spread,” he said.

Going into spring planting, the analyst said the coming crop is based on a successful season with sufficient moisture to produce an average to above-average harvest. Canola, he emphasized, cannot afford another drought on the Canadian Prairies.

“These prices are going to stay here, unless the whole picture changes. That means the war [in Ukraine] gets settled, North American gets a huge crop and you run the funds to the downside.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Concerns stemming from Russia’s invasion of Ukraine have sparked huge gains, but there’s very likely a good amount of volatility ahead.

“The market is being really driven by emotions and that just can’t hold,” Anderson said. “Once that emotion settles down, the price will settle down.”

Ukraine and Russia are highly reliant on their Black Sea ports to ship their exports. Ukraine last week indefinitely suspended commercial shipping at its ports and Russian forces have since reportedly captured or were besieging several others.

International economic sanctions, meanwhile, have bitten into Russia’s outbound shipments. Countries including Canada and Britain have already shut their ports to Russian vessels and other jurisdictions including the U.S. and European Union are reported to be considering same.

A number of countries were said to be turning to the E.U. and North America in hopes of filling gaps in their import needs.

Anderson suggested the market could see a number of limit-down days, in a similar manner to the limit-up days experienced during the first part of the week of Feb. 28 for some commodities, such as wheat and soybeans.

Delegations from Russia and Ukraine continued to meet in hope of reaching a cease-fire agreement. However, the chances for such were said to be very slim despite the fighting dragging on.

“These markets are highly overbought due to the war premium that’s going into wheat and crude oil. We got a speculative buying surge that won’t last,” Anderson said.

He forecast a “heavy week of volatility ahead” with prices for all grains and oilseeds.

To that end, Anderson said ProMarket was advising its clients to avoid buying the futures and going with put options instead.

“At least that way your only risk is the put premium.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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“We’re still stuck in a trading range,” said Keith Ferley of RBC Dominion Securities in Winnipeg.

Activity in outside markets, including Malaysian palm oil and U.S. soybean futures, accounted for some of the movement in the Canadian oilseed within that range.

On the one hand, palm oil futures climbed to record highs during the week, which provided some support.

“Palm oil is the leader and is keeping a bid underneath canola,” Ferley said.

However, bearish yield and stocks data from the U.S. Department of Agriculture weighed heavily on Chicago Board of Trade soybeans during the week, with some of that selling pressure spilling into the canola market.

Ferley said canola was likely lagging soybeans to the downside, though, as the U.S. soybean harvest is only half complete. Meanwhile, the canola harvest is already done, limiting the amount of seasonal harvest pressure in the Canadian oilseed.

From a chart perspective, January canola hit a session high of $924.50 per tonne on Friday and a low of $885.70 on Tuesday, before settling Wednesday at $893.90. Longer-term support comes in around $850 per tonne.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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While tight Canadian supplies due to a Prairie drought have underpinned the market for some time, the latest strength and any future direction may be more closely tied to movement in energy markets.

“There seems to be a mindset shift occurring here, and it’s making canola become a pure energy play,” analyst Mike Jubinville of MarketsFarm said.

With crude oil, natural gas and other energy markets seeing strength around the world “I think canola is getting caught up in the process,” Jubinville said, adding “the energy issues are providing the underlying force behind the market right now.

“As long as the bullish momentum is being maintained in the energy sector, it’s hard to envision canola falling back in any sustained fashion.”

Rapeseed grown in Europe is a major feedstock for biodiesel production there, with rapeseed futures trading at record high levels. Jubinville expected activity in European rapeseed would be a key feature to watch in the Canadian canola market.

“If we have a change in momentum in the energy sector, that will extinguish this current rally,” he added.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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That’s given Winnipeg-based analyst Wayne Palmer of Exceed Grain reason to believe canola will bust through $900 per tonne.

“That’s all due to the drought and canola is just around the corner from breaking out and I think, taking a moonshot as well,” Palmer said.

“Canola is going to be traded methodically. I think the fireworks are towards the end of October.”

Palmer based that on increases seen on the Chicago Board of Trade (CBOT) during harvest in the United States. His forecast has been based on yields in the U.S. coming in below average and that end-users are buying now rather than waiting until harvest is finished.

On top of that, the U.S. dollar has spiked in recent days, which would otherwise push prices downward.

“Everything should be a bearish scenario and not a bullish scenario,” he said.

Palmer likened canola to Chicago oats, which were pushing toward US$6 per bushel due to the drought-stricken crop providing low yields.

Besides what’s been happening at the ICE and CBOT, European rapeseed and Malaysian palm oil were hitting new contract highs — which also underpinned canola values.

As well, Palmer said “everyone is short” when it comes to their canola.

As October is about to begin, there will soon be movement to roll out of the November contract into January and other positions.

With growing expectations of the canola harvest coming up short of 12.8 million tonnes forecast by Statistics Canada, the trade will want to move when it can.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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An upcoming supply/demand report from the U.S. Department of Agriculture also has the potential to sway the market.

“We’re just waiting to see how yields come out of the field… and the USDA report on Friday (Sept. 10),” said Jamie Wilton of RJ O’Brien in Winnipeg.

The canola harvest is still in its early stages across most of the Prairies, with the summer drought leading to disappointing yields in many cases.

One southern Manitoba farmer noted some fields in his area were only hitting bushels per acre in the single digits. However, he added, fields that lucked out with timely rains were doing much better.

Statistics Canada pegged the crop at 14.7 million tonnes in a recent report. While that would be the smallest crop of the past decade, it still came in above trade expectations.

Meanwhile, in a separate report released Wednesday, the government agency pegged canola ending stocks in the country, as of July 31, at 1.8 million tonnes. While that figure was roughly half of the previous year’s carryout, it still came in well above market guesses.

While the eventual size of the Canadian canola crop will play a major role in the futures market going forward, much of the direction will also continue to stem from the larger U.S. soybean market.

The September supply/demand estimates from USDA could lead to nearby price swings, if there are any surprises in the data.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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