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Pressure on the loonie helps lift canola futures, 05.03.18

Pressure on the loonie helps lift canola futures

Contracts on the ICE Futures Canada canola complex continued to strengthen during the week ended Feb. 23, as weather issues in South America and action in the Canadian dollar underpinned the market.

Traders were rolling out of the March contract and into May, resulting in a flurry of spread action during the week. The tilt in volumes saw May become the most active contract on the charts. The May contract closed Feb. 16 at $508.20 a tonne but climbed to $516.30 at the close on Feb. 23.

Support came from weakness in the Canadian dollar, worries over dry weather in South America and speculative buying. Crushers also began to buy more canola as their margins began to improve.

Exports have been somewhat lukewarm, though. A lack of Chinese buying was cited as one of the major concerns. One trader said he thought the carry-out could hit 2.5 million tonnes as a result. Up to now, most estimates have hovered around the two-million-tonne mark.

The Canadian dollar continues to dwell below the 80 U.S. cents mark as fears over inflation keep the currency under pressure.

There are also ideas that the weather premium brought on by dry soil conditions in Argentina has largely been baked into the market. However, excess rain in Brazil has delayed harvest efforts in certain areas, which gave canola futures a boost.

In the U.S., it’s been a fairly bullish time for most grains and oilseeds.

May soybeans neared the US$10.50-per-bushel mark during the week ended Feb. 23. Dry weather concerns in Argentina underpinned the move with speculative buying providing support. At the U.S. Department of Agriculture’s outlook conference, analysts said they expected farmers in the U.S. to plant roughly 90 million acres to soybeans this year — the same amount as in corn.

May corn ended right near the US$3.75-per-bushel mark, also taking support from weather issues in South America. Support came from U.S. ethanol production, which was up slightly from the previous week. Strength in the U.S. dollar weighed on values.

It was a slightly choppier affair for Chicago wheat as the May contract hit the US$4.74-per-bushel mark before backing off the high by Friday’s close. Dryness in the U.S. Plains remains a supportive factor.

On the international front, Russian consulting firm IKAR pegged the country’s wheat exports at 37.5 million tonnes, nearly a million tonnes higher than in its previous report.

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