CNS Canada — ICE Futures canola contracts recovered off of nearby lows over the week ended Wednesday, but failed to rise to the same extent as the product values as the commodity remains expensive compared to other oilseeds.
With the harvest underway across the Prairies, traders are focused on yield estimates and the size of the crop. Statistics Canada on Friday pegged production at 19.2 million tonnes, which would be well below the 21.3 million-tonne crop grown the previous year.
“Estimating the canola crop is challenging at best,” said Ken Ball of PI Financial in Winnipeg. “In the areas where the crops were fairly good, the yields are generally coming in above expectation, but there are fairly widespread areas where they didn’t have the moisture and yields are disappointing.”
“My guess right now is that the crop is bigger than the StatsCan estimate,” said Ball, noting the August report is notoriously on the low side. “It’s just a question of what kind of damage the heat did in August.”
StatsCan will also release estimates of stocks, as of July 31, on Thursday. Trade estimates are generally in the 2.5 million-tonne area, which would be well above the 1.3 million-tonne carryout from the previous year.
“In a year where the crop is uncertain, if the stocks came in a little on the light side it would certainly increase the nervousness of the market,” said Ball.
While Canadian supply/demand fundamentals should remain a major driver for canola, the Canadian market will also take plenty of direction from Chicago Board of Trade soybeans.
“The bean market is showing clearly that it has no ability to rally going into the (U.S. Department of Agriculture) report,” said Ball.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.