March 11 – Canola Weekly GrainCents Digest

Canola prices followed soybeans lower this week, highlighted by Friday’s move to the downside. Losses were about $7 CAD/metric tonne on this day alone.

Canola prices followed soybeans lower this week, highlighted by Friday’s move to the downside. Losses were about $6 to $7 CAD/metric tonne on this day alone.

For the May 2018 contract, canola prices lost about 2.3% or $12.20 to close at $512. For the July 2018 contract, canola prices lost 2.4% or early $13 to end the tumultuous week at $518.50.

On new crop canola prices, the November 2018 contract closed at $507.80, down 1.9% or $10 from last Friday’s close.

Farmers were selling at the same time that soyoil prices were falling. The USDA predicted that domestic soybean carryout would hit their highest level ever, which certainly weighed on sentiment.  The agency pegged carryout at 555 million bushels, nearly an 80% jump from last year.

There is also growing concern that China may soon announce restrictions on U.S. soybeans in retaliation for American tariffs on steel and aluminum. While we do not suspect a long-term impact on global soybean trade, a likely overreaction would fuel a short-term selloff.

However, the fact remains that canola still remains an inexpensive substitution to soybeans around the globe.

With that in mind though, the International Grains Council projected on Friday that 2018 planted acres of canola/rapeseed were destined to hit record levels. The IGC projects a 1.5% increase to a record 91.7 million acres.

Specifically, the IGC expects a 4% jump in Canadian harvested acres to 23.7 million. That’s just below the AAFC’s guess of 24 million. The biggest increases are expected in Russia and Ukraine, which will see total harvested acres increase to 3 million and 2.5 million, respectively.

Looking forward, Monday will be a pivotal day in the market. Some traders may try to squeeze some short-term gains in the market. We might have to take action with our remaining position in the next month or so if speculators pile on the South American activity, but we are not in a rush and we’re not too worried about Friday’s sell-off.

Canola exports are another metric that we need to keep an eye on as we look forward. According to Canadian Grain Commission data on the weekly movement of grains from the Prairie elevators, canola exports are having hard times in exceeding last year’s exports.

On the last note, the exchange rate between the loonie and the green buck is another factor in the background. The recent weakness of our currency has been very supportive prices.

Our canola sales tactics ahead of the Thursday WASDE report were purely meant to be able to capture the upside opportunity if the market reacted bullishly to the USDA numbers. We figured that there was about 70% chance of this happening and so having a plan in place is a much better plan than not.

We have very strong conviction that if it wasn’t for the increase in US soybean stocks, we would’ve gotten a positive reaction to the upside and that’s what our plan was ready for.

However, this didn’t happen and we saw canola prices fall about $10 CAD/tonne this week. This is frustrating obviously but we are far from disappointed.

Why?

We still have another 5 months left to price the remaining 20% left of our old crop canola. We may see a lull in prices and perhaps some downward pressure in the short-term but if history is our friend, the bulls will likely start rolling again toward the end of the month, based on post-WASDE history.

Thus, we remain 80% sold for old crop and 30% sold in new crop.

In other market analysis news this week, we added Adrian Uzea to our GrainCents team. This week, he’s provided you with some analysis on what’s expected for Australia’s canola crop in 2018/19 (see link and charts below).

A couple notes on Adrian:

• He hails from a mixed farm in Romania’s breadbasket;
• He has a Master’s degree in Ag Economics from the University of Saskatchewan; and,
For the past eight years has held ag market research and analysis positions while working for Canadian agriculture producers associations, lending institutions, data research (AGDATA), and grain marketing advisory companies (DePutter Publishing).

He’s a great addition to the expanding GrainCents product and we’re lucky to have him. As such, we sign off a little bit different going forward:

 

Have a great week!

– Brennan, Garrett, and Adrian

 

March 9 – Australian Canola Acres Win Big in the 2018/19 Crop Shuffle

March 7 – What to Watch in Thursday’s WASDE Report

March 7 – GrainCents Crop Sales Position Update

March 7 – Weaker Palm Oil Demand Means Weaker Palm Oil Prices

March 7 – Here’s Your Answer to $12 / Bushel Canola

March 4 – Will Soybeans Drive Canola Prices Even Higher?

March 4 – Canola Weekly GrainCents Digest

March 2 – What’s the Likelihood of Canola Getting Grown in Texas?

March 1 – GrainCents Crop Sales Position Update

March 1 – Grain Rail Shipments on the Rebound? Not in 2018

February 25 – Canola Weekly GrainCents Digest

February 23 – The IGC Thinks There’ll Be Lots of Canola Available in 2018/19

February 22 – China Will Always Need to Import Canola

February 21 – GrainCents Canola Sales Position Update

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.