MarketsFarm – There is a rather significant bearish outlook for canola for the rest of December, according to Jerry Klassen of Resilient Commodity Analysis. He said a large part of this was generated by the Statistics Canada production report released on Dec. 4.
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.
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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.
