After hitting a record net long position for canola of 84,850 contracts on Feb. 25, speculators had reduced that position by about 57,000 contracts in the span of two weeks, according to the latest Commitments of Traders report from the United States Commodity Futures Trading Commission (CFTC).

The net managed money long position in canola futures came in at 27,939 contracts as of March 11 (78,476 long/50,537 short) — a decline of roughly 37,000 contracts from the previous week.

Open interest in the canola market was only down by 2,177 on the week at 239,565 contracts.

Net short down in soybeans

At the Chicago Board of Trade, the net short position in soybeans of about 7,900 contracts was down by about 16,000 contracts from the previous week as traders covered some of those shorts and put on new longs. Meanwhile, soyoil moved from a net long position of 9,750 contracts to a net short of about 13,300.

Corn traders liquidate some longs

The net long position in corn was down by about 74,000 contracts to come in at roughly 132,400.

In wheat, the Chicago soft wheat market reported a net short position of 76,300 contracts. The net short in Kansas City hard red winter wheat came in at roughly 47,900 contracts. In Minneapolis spring wheat, managed money traders were holding a net short of around 25,600 contracts as of March 11.

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“We need to go lower to get some export business accomplished,” said Jamie Wilton of RJ O’Brien in Winnipeg on the likelihood of additional losses in canola.

Canada has exported 3.0 million tonnes of canola through 27 weeks of the 2023/24 marketing year, well short of the 4.5 million tonnes exported by the same time the previous year, according to Canadian Grain Commission data.

Wilton added that farmers are still holding large amounts of unpriced canola, making them heavily long the market and looking to sell whenever the futures try to move higher.

Total producer deliveries of canola into the commercial pipeline as of week 27 of the marketing year of 8.6 million tonnes were 16 per cent behind the previous year’s pace.

On the other side, speculative fund traders are heavily short the market, and content to watch their profits grow as prices trend lower, according to Wilton.

With newly harvested South American soybean crops starting to weigh on the Chicago soy market, Wilton expected it would take an outside catalyst, such as a weather issues somewhere in the world, to break canola out of its downtrend.

“We need a weather scare, and I don’t think there’s anything substantial enough out there,” added MarketsFarm analyst Bruce Burnett.

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

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In the federal agency’s report, it increased canola production for 2023/24 from its September estimate by about 900,000 tonnes at 18.3 million, which was the average trade guess ahead of the report.

While the canola number was in line with the average trade guess Klassen also said it surprised many participants. He suggested the trade was now wondering if there is actually more canola out there than what StatCan calculated.

Since the report was issued, the January canola contract dropped C$30.60 per tonne on the Intercontinental Exchange, closing out Dec. 6 at C$649.90. And this was despite 2023/24 canola production being two per cent lower than what came off of the fields last year.

Klassen said major importers of Canadian canola and domestic crushers were backing away from their purchases with both seeing supplies being sufficient enough.

The most recent numbers from the Canadian Grain Commission placed year-to-date canola exports at about 2.03 million tonnes, less than the 2.64 million the same time last year. However, so far through the 2023/24 marketing year domestic usage remained ahead of last year at 3.48 million tonnes versus 3.17 million.

“With the larger crop, the trade is now anticipating we are going to get overwhelmed with deliveries,” Klassen stated.

The CGC reported producer deliveries of canola lagged behind those from last year at 5.59 million tonnes compared to 6.52 million.

“On top of that, you got the spec funds pouring it on,” Klassen said.

The latest numbers from the United States Commodity Futures Trading Commission reported the net managed money short position in canola was at 81,770, with 88,688 short and 6,918 long as of Nov. 28.

Klassen said that the declines in the global vegetable oil market have added to the bearish tone in ICE canola futures.

“You’re not going to see things turn around before the end of the month,” he stated, noting that January and February are traditionally quite bearish for canola as that’s when farmers often bring in more of the oilseed.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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The January canola contract closed at $702.30 per tonne on Wednesday a weekly loss of $7.40. The contract fell below the $700 level on U.S. Thanksgiving on Nov. 23, a day with little volume.

However, Ball said, canola is trying to recover.

“There’s nothing all that exciting to look at,” he said. “It’s going to hinge exclusively on how well the (soyoil) will do.”

While Ball said a slower export pace than last year will put some pressure on canola prices, he cautiously thinks there could be some strength in both canola and soyoil in the short-term.

“Weather is going to come into play a lot, because the soybean market has been well supported by soymeal prices. But if the South American rainfall comes through over the next four to six weeks, that’s going to break the meal market and the bean market could fall off a lot,” he added.

“I think canola could rebound $20, $30, $40/tonne if soyoil could maintain its strength.”

Ball also believes the upcoming crop production report from Statistics Canada on Dec. 4 may already be affecting prices on ICE Futures.

The average trade estimate for this year’s crop was 18.3 million tonnes, derived from a range between 17.2 million and 19.7 million. In 2022-23, Canada produced 18.7 million tonnes.

“The general feeling is that this year’s crop is not that far off from last year. There were some poor areas; some good areas. Some areas improved; some didn’t,” he said.

Canola, he added, “seems a bit reluctant at times to go up. It’s lagging behind the (Chicago soy complex) a bit, which is not uncommon… but traders may be a little bit leery in buying canola if there is indeed a large upswing in production expected.

“If we do get a number around 18.3 million… that may keep the market somewhat subdued.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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The report was delayed due to the U.S. Thanksgiving holiday.

As of Nov. 21, 2023, the net managed money short position in ICE canola futures came in at 87,007 (5,968 long, 92,975 short), down about 11,000 from the previous week.

Open interest in the canola market came in at 265,295 contracts, down by 13,291 on the week.

At the Chicago Board of Trade, fund traders liquidated some of their large net long position in soybeans, taking it to roughly 85,800 contracts from 95,300 the previous week.

Meanwhile, the net short position in corn was up by about 26,000 contracts, coming in at about 201,800 contracts as traders added new shorts and liquidated some longs.

In wheat, the Chicago soft wheat market reported a net short position of about 117,400 contracts. The net short in K.C. hard red winter wheat came in at roughly 48,300 contracts.

In Minneapolis spring wheat, managed money traders were holding a net short of around 27,800 contracts, which was relatively unchanged on the week.

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

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With traders in the United States moving to the sidelines for the U.S. Thanksgiving holiday, activity should be thin and choppy until next Monday.

Speculators moving money around accounted for much of the activity, with movement in the Chicago soybean market in reaction to Brazilian weather forecasts another feature.

“It’s purely technical and we’re waiting to see how the (South American) weather develops,” said commodity futures specialist Jamie Wilton, of RJ O’Brien in Winnipeg.

While canola fell on Wednesday, the nearby trend is still pointing higher, according to MarketsFarm analyst Mike Jubinville.

With speculative fund traders holding a large net short position in canola, he expected the January contract would need to close above $735 per tonne to trigger a more sustained move higher, with $750 the next upside target.

The 200-day moving average around $741 per tonne was another chart point to watch, according to Wilton, with the nine-day exponential moving average around $709 a key support level.

“Monday will be key,” according to Jubinville, who expected U.S. traders returning from the Thanksgiving holiday would look at the South American situation and set the direction of the oilseed markets going into December.

“It will just be modest shifting of fund positions until we see a real signal from a chart perspective, and we have not seen that signal yet,” he said.

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

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As of Nov. 14, the net managed money short position in canola futures came in at 98,129 (5,389 long, 103,518 short), a decrease of about 4,750 from the previous week.

Open interest in the canola market came in at 278,586 contracts, which was up by 3,151 on the week.

At the Chicago Board of Trade, fund traders added 24,000 contracts to their net long position in soybeans, taking it to roughly 95,300 contracts.

Meanwhile, the net short position in corn dipped slightly, coming in at about 174,600 contracts as traders added to their positions on both sides of the market.

In wheat, the Chicago soft wheat market reported a net short position of about 97,400 contracts. The net short in Kansas City hard red winter wheat came in at roughly 37,700 contracts, which would be its largest net-short since September 2019.

In Minneapolis spring wheat, managed money traders were holding a net short of around 27,800 contracts, which was down slightly from the record-large short position over 31,000 contracts reported the previous week.

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

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“On Oct. 16, we were trading [January] canola at C$731 per tonne. On Nov. 2 we went down to C$672/tonne, a C$60 drop. Today, we traded at C$725, a C$50 increase,” said Palmer.

“All this is the mighty funds. The funds are carrying a record short position. They got spooked in the middle of October, took half of their position back, and then proceeded to put on a new short position towards the beginning of November,” he explained.

The United States Commodity Futures Trading Commission reported that as of Nov. 7 the net managed money short position in ICE canola futures was 102,884 contracts, based on 4,876 long and 107,760 short.

Palmer said those spec funds were keeping a close eye on the weather in Brazil, which is at either end of the spectrum. While the north remained far too dry to plant, the south was much too wet to get onto the fields. He said the long-range forecast has called for rain in the country’s north, something much needed for its soybean output to hit a record 163 million tonnes in 2023/24, according to the United States Department of Agriculture.

“If they do not do their part, then all of a sudden, the whole world starts coming to the U.S. and Canada for soybeans,” Palmer commented.

In the meantime, he said Canadian canola growers were cash rich with their bins full of the oilseed. With that he laid out two scenarios.

“If [northern] Brazil gets their needed rain, there’s just no export buying that could adequately take care of our canola supply and the soybean supply in the U.S.,” Palmer stated.

“The funds are going to sell everything in sight and take this thing lower. And the biggest thing is, the farmer is long. He hasn’t sold much and eventually is going to have to either dump it on the downside and make new lows, or he’s going to make more money filtering it out as we hit targeted prices.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Errol Anderson of ProMarket Communications has been impressed with canola’s recent rise. The January contract on ICE Futures was as low at $672 per tonne on Nov. 2 before rising to a week-long high of $709.50 five days later and eventually closing at $699.30 on Wednesday.

“We’ve gained about $30 per tonne and this has really been stimulated by the recovery in soybeans,” Anderson said. “The beans have also broken a near-term downtrend. Canola has been largely pulled up.”

On Oct. 25, the January soybean contract was as low at US$12.975 per bushel before rising to US$13.845/bu. two weeks later. Extreme weather in Brazil has cooled off expectations for the country’s soybean crop and China has recently purchased cargoes from the U.S. Both of these events have caused soybean prices to rise, according to Anderson.

“But the U.S. dollar is starting to go back up again. Right now, U.S. soybeans appear to be fairly competitively priced. But I think there’s a possibility the U.S. dollar will be quite firm,” he said.

The support for canola has been timely considering crude oil prices have dropped to approximately US$75 per barrel for West Texas International and US$80 for Brent due to economic concerns.

“The demand side on crude oil is extremely weak right now,” Anderson said.

He added that the good times for canola may be coming to an end.

“With the washout in crude and the canola market going up, that is very positive,” said Anderson, although he added that these rallies may not hold.

Given recent losses in energy markets and a general deflationary outlook on commodities, Anderson recommended farmers take the opportunity to look at their cash sales as “soybeans will have a bad day and it will pull the canola market down.”

On the other hand, if canola becomes the beneficiary of fresh news, according to Anderson, prices could move up to $730/tonne.

“If we break through, there could be another $20/tonne, but the odds of that right now are a little bit low to sell those rallies,” he said.

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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As of Oct. 31, 2023, the net managed money short position in canola futures came in at 105,440 contracts (3,930 long, 109,370 short), an increase of about 12,000 contracts from the previous week and the largest net short position ever recorded for the commodity in the past five-and-a-half years of available data.

Open interest in the canola market came in at 275,456 contracts, which was up by about 5,000 contracts from the previous week.

At the Chicago Board of Trade, fund traders added to their small net long position in soybeans, taking it to roughly 23,000 contracts.

Meanwhile, the net short position in corn decreased by nearly 50,000 at roughly 147,100 contracts.

In wheat, the Chicago soft wheat market reported a net short position of about 108,800 contracts, which was up by about 11,000 contracts from the previous week. The net short in Kansas City hard red winter wheat came in at roughly 33,300 contracts. In Minneapolis spring wheat, managed money traders were holding a net short of around 29,000 contracts.

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

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