“The general trend is still pointing downward, but we’ve been hovering around this C$600 level for a month now,” said commodities investment advisor David Derwin of PI Financial in Winnipeg.

“It’s getting closer, but perhaps not quite yet,” said Derwin on whether the lows were in yet, adding that if values managed to stabilize around the C$600 per tonne level for another month he would be more confident that the downtrend was broken.

The May contract traded just above the C$600 per tonne mark on March 6, but settled slightly below that level at C$598.90 per tonne.

While increased farmer selling on any moves higher would keep a lid on the upside, Derwin noted that many producers were already well sold on their canola. Supportive seasonal price trends, such as weather news during the spring planting season, also often underpin values at this time of year.

Statistics Canada releases its first planting expectations for the upcoming growing season on March 11, with average pre-report expectations calling for a slight decline in seeded canola area from the 22.1 million acres planted in 2023. However, opinions are divided, and some analysts expect canola area could still be up on the year.

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“I think there’s a feeling in the country that some farmers are throwing in the towel. There’s still a bearish outlook for canola in the longer term,” he stated, suggesting growers were taking whatever they can get for their canola. He called it “emotional selling.”

Trading volumes surged to more than 60,000 contracts on Jan. 30 and 31, which Klassen said was a combination of that farmer selling plus the speculative funds selling as well while the commercial buyers made some limited purchases.

“When you have high volumes like that, it confirms the price structure. Sometimes we are getting to [price] lows where the markets are due for a balance.

Klassen said to keep a close eye on the upcoming stocks as of Dec. 31 report from Statistics Canada to be released Feb. 8.

“That stocks report is going to be very important this year. I think it’s going to show us that the farmer has not sold a lot of canola,” he said.

The Canadian Grain Commission reported producer deliveries of canola were 7.8 million tonnes as of Jan. 21. That was down from 9.6 million tonnes the same time last year.

“There are ideas that those stock reports are important because it confirms that production number. If the stocks [next week] come out a bit higher than we are anticipating, that crop was better than what StatCan had on their November survey,” Klassen continued.

StatCan pegged the 2023/24 canola harvest at 18.3 million tonnes, which was an improvement over previous estimates that crop was going to be smaller due to dryness in the early summer.

Klassen also noted canola’s March/May spread was getting wider.

“That tells us the end users are pretty well covered for their nearby requirements,” he said. “The market is telling you, ‘We don’t need your canola right now. Please store it and sell it to us in June-July.’”

Klassen noted recent dryness in Argentina and a much smaller than expected soybean harvest in Brazil has provided some support to the Chicago soy complex and to ICE canola futures. But he said the large soybean harvest overall to coming out of South America will put pressure on North American oilseeds, especially the products.

“The oil complex and the meal complex really have a bearish outlook going into summer,” he commented.

With early estimates of more U.S. soybean and Canadian canola acres to be seeded this spring, Klassen said that could eliminate the usual rally in the oilseeds in March and April.

“But it looks like with the larger acreage the market will have a bit of more of a cushion if yields are below average,” he noted.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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“We are in the middle of a demand-pull market… and the market has not yet done what it needs to do to accomplish the task of curtailing demand,” MarketsFarm Pro analyst Mike Jubinville said.

“We’re rapidly running out of canola on this side of the border,” he added, noting soybean supplies in the U.S. were also tightening.

“Even at record-high futures prices, basis levels for summer delivery are as much as $85 above the futures… which shows the demand is extraordinary,” he said.

Reports of Canadian crushers importing Ukrainian canola for delivery sometime this summer highlighted the tight supply situation.

Seeded canola area in Canada is generally expected to be up on the year, with Statistics Canada due to release its first survey-based acreage estimates on Tuesday (April 27). However, agronomic issues will likely limit the extent of the acreage increase.

Even with increased acres, “the demand pull in the market is so strong that we won’t be rebuilding inventory next year,” said Jubinville.

However, he noted, canola was looking overbought from a chart standpoint, which could lead to a profit-taking correction.

That said, it’s still too early for a sustained downward move, with every move lower a buying opportunity for the time being.

“(Canola futures) don’t have to be higher every day, but the trend is up until it tells us different,” Jubinville said.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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Errol Anderson, an analyst with ProMarket Communications in Calgary, emphasized there will be a good amount of volatility in the markets, with wide swings possible from day to day.

“Part of it is the amount of liquidity that’s pouring into these markets,” he said, as funds awash in money are “looking for a home.”

Anderson pointed to the wheat market as an example.

“Wheat is rallying as well, yet we just got a pretty good shot of moisture and the Black Sea export prices are coming down. To me, this is a movement of the funds,” he said.

“It puts my antenna up that we are going to be in for some choppiness. As strong as we are today, we can be down tomorrow.”

Other supportive influences for the Canadian oilseed include tight old-crop supplies and persisting dryness across much of the Prairies. While the region received varied amounts of snow, with some areas getting upward of 10 inches, Anderson said it’s simply not enough on the whole to make a significant impact on dry conditions.

Meanwhile, he spotted signals that point to prices turning about-face, such as the easing of soybean and corn prices in China, as the import giant begins to turn away from the United States and eyes fresh supplies in Brazil and Argentina.

Another element that has been a concern to Anderson is the price of the July canola contract. Although July exceeded $755 per tonne on Wednesday, Anderson stressed that its major support is way down at $660.

“Can we drop $100? The crazy thing about this is we could.”

Furthermore, predicting the market over the coming weeks and months will be more difficult than it recently has been, according to Anderson.

“The market has to feel comfortable there’s a crop on the way,” he said, noting until then, volatility will remain.

There will be some sort of semblance for calmer waters when Statistics Canada issues its first survey-based crop projections for 2021 at the end of this month.

While Agriculture and Agri-Food Canada projected 20.1 million acres of canola to be seeded this spring, Anderson believes there can easily be more than 22 million acres going into the ground.

Also, he predicted more acres for flax and barley, while those for lentils, peas and wheat are likely to be reduced.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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China and Canada are locked in a diplomatic and trade dispute that has resulted in China blocking imports of Canadian canola from two companies. ICE nearby canola futures touched a more than four-year-low on Tuesday.

Canola plantings are likely to slip by 1.5 million acres from a year ago to 21.3 million, the smallest in three years, according to a survey of farmers conducted by Statistics Canada.

The average trade estimate of analysts and traders before the report was 21.8 million acres.

ICE November canola futures, which represent the next harvest, edged higher after the report. Nearby canola futures have closed lower for six consecutive sessions.

“We’re getting close to the point where if you only grow an average (canola) crop, or less than average crop, you’re going to lose money,” said Chuck Fossay, who farms at Starbuck, Man.,

Canada is the world’s biggest shipper of canola, a cousin of rapeseed that is used largely to produce vegetable oil.

Along with price pressure from lower Chinese demand for canola, weak soybean prices have depressed canola’s value, Fossay said.

Many acres that farmers seeded last year with yellow-flowering canola will instead yield spring wheat, grown for baking. Spring wheat plantings look to be Canada’s largest in 18 years, reaching 19.4 million acres, as farmers shun both low-priced canola and durum wheat.

Minneapolis September spring wheat futures slipped one per cent.

StatsCan pegged the all-wheat area at 25.7 million acres, up four per cent and exceeding the average trade expectation of 24.8 million acres.

Planting is underway across parts of the Prairies, but farmers seed most of the crop in May.

With dry conditions in Saskatchewan and Alberta, farmers may taper back canola plantings even further, said Bruce Burnett, director of markets and weather at Glacier FarmMedia.

Some acres are likely to flip from canola to barley and oats, grains that StatsCan estimated would see planting increases.

— Reporting for Reuters by Rod Nickel in Winnipeg and Dale Smith in Ottawa.

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“April is usually the quietest month of the year for us,” said Ken Ball of PI Financial in Winnipeg.

In addition to large world oilseed supplies overhanging the market, Canada is also still dealing with the lack of demand from China.

While canola prices are already near major lows, he expected the general trend remained pointed down “unless we get into some major weather issues in June and July.”

Some Prairie farmers are talking about reducing canola acres, “but not that much else is leaping out for them as an alternative,” said Ball.

“The China situation might scare a few people out of canola… but I don’t see any huge switches going on,” he said, adding that most producers were likely sticking to their rotations.

Statistics Canada releases its first survey-based acreage estimates of the year next Wednesday (April 24).

“Until this crop gets 50 per cent seeded, you probably have a sideways market here,” said Jerry Klassen, manager of Canadian operations with Swiss-based GAP S.A. Grains and Products in Winnipeg.

Beyond that, Klassen said aggressive farmer selling can often weigh on prices in July, while any serious weather problems during the growing season could provide support.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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Canadian canola exports to China are effectively non-existent right now, with the absence of that major customer casting a bearish tone on canola.

“The trend is sideways at best, and probably drifting a little lower,” said David Derwin of PI Financial, adding that the canola market was bearish even before the diplomatic dispute with China.

While a resolution to the trade dispute would be supportive, Derwin said values may not see much of a boost given the large old-crop supply situation.

“Putting the China issues aside, the canola market was bearish anyway,” said Mike Jubinville of MarketsFarm Pro, pointing to South American harvest pressure, large U.S. soybean supplies, and burdensome old-crop canola stocks.

With the negative news already factored into the market, Jubinville said canola had reached a point of consolidation.

Knee-jerk panic selling from farmers has exhausted itself, and producers are now locking up their bins. Meanwhile, speculators are already holding a large net short position. “So who’s left to sell?” asked Jubinville.

Beyond Canada’s trade uncertainty with China, market participants are also following trade talks between the U.S. and China. A deal between those two countries would help soybeans, which could provide some spillover support for canola.

The possibility of increased demand from other bargain-hunting customers could also provide support.

“Will we unlock demand from some other locations as prices get lower?” asked Jon Driedger, of FarmLink Marketing Solutions.

Looking to the new crop, most analysts expect canola acres will be down from earlier forecasts as farmers reconsider their options.

Driedger expected farmers would stick to their rotations, as “not that many alternatives that look great.”

Derwin and Jubinville agreed farmers were unlikely to deviate too much from their rotations.

“We’ll lose some acres this year, but I still think canola stacks up reasonably well relative to other options,” said Jubinville.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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Canola plantings reached 22.7 million acres, shy of last year’s 23 million, but exceeding the average trade guess of 22.4 million acres. In spring, Statscan estimated that farmers intended to plant 21.4 million.

Farmers tend to lowball their planting intentions in the spring, and a trade war between the U.S. and China affecting U.S. soybean exports may also be in the back of growers’ minders, said Dave Reimann, market analyst at Cargill.

Some suspect that China could import more canola and crush it for meal in pig feed as a substitute for soymeal, which would support canola prices.

ICE Futures Canada November canola futures turned slightly negative after the report, sliding 90 cents, to $509.50 per tonne.

Statscan pegged all-wheat area at 24.7 million acres, up from last year’s 22.4 million and in line with the average trade expectation of 24.8 million acres. They had expected in the spring to sow 25.3 million acres.

“Nothing too shocking,” Reimann said, adding that a small reduction in wheat plantings from the spring estimate is unlikely to boost prices, given ample global stockpiles.

Canada is one of the world’s largest wheat exporters and the biggest shipper of canola, a cousin of rapeseed used largely to produce vegetable oil.

— Reporting for Reuters by Rod Nickel in St. Paul, Minn. and Dale Smith in Ottawa.

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“Canola is stuck in neutral,” said Wayne Palmer, senior market analyst with Agri-Trend Marketing. “We’re at that stage where it’s rangebound, waiting for news, and watching the weather across the Prairies.”

“It all depends on weather, seeding, and what the American market does,” he said; farmers were “cash-rich” for the time being and not selling, as most had enough money to get themselves through until they see a good start to crop development.

According to a Statistics Canada survey conducted in March, Canadian farmers only intended to plant 21.4 million acres of canola in 2018. That would be down from the 23 million seeded the previous year.

Average trade estimates had been for an increase, and most industry participants still expect to see a new record seeded area.

“That (acreage) number will be much, much higher when it’s all said and done,” said Palmer, forecasting the crop at closer to 24 million acres.

“We have an abundance of canola now, and we’ll have even more canola when it’s all said and done unless we get a drought somewhere in North America.”

Current cash bids for both old- and new-crop were looking profitable, he added, and suggested it would likely be a good idea for producers to price some canola.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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“It’s unusual for everybody to just be this out of whack on this report,” said Ken Ball of PI Financial in Winnipeg.

“I think the chatter’s been circling for quite a while that canola acres were going to be up a little bit and probably wheat acres up a little bit and then other things down a little bit. But it didn’t come out that way at all.”

In Statistics Canada’s principal field crop areas report, released Friday, canola acreage for 2018-19 as of March 31 is predicted to be at 21.4 million acres, compared to pre-report trade estimates that all came in above last year’s record of 23 million acres.

StatsCan predicts pea acres at 3.9 million, compared to trade estimates of 3.2 million to 3.7 million, and lentil acres at 4.1 million, compared to pre-report estimates of three million to 3.9 million. Canadian farmers last year seeded 4.1 million acres of peas and 4.4 million acres of lentils.

While canola acreage is set to fall, wheat acreage will grow, according to StatsCan’s estimates. Wheat area is predicted to be at 25.3 million acres, compared to pre-report estimates of 20.5 million to 24.2 million acres and the year-ago level of 22.6 million acres.

The growth is estimated to come from spring wheat acres, which are predicted to jump by 15.4 per cent, to 18.2 million.

Most traders and analysts were shocked by the numbers. When contacted before the report, almost all had pegged canola to hit a record acreage. As farmers are expected to step back from pulse crops over trade uncertainty with India, traders had foreseen an increase in wheat acres — but not by as much as StatsCan predicted Friday.

“I’m a little bit skeptical that we’re going to see an actual decline in canola acres,” said Jonathon Driedger, a senior market analyst with FarmLink Marketing.

“I think that the feedback we get from our clients, from other people in the country, anecdote reports from seed sales reps and so forth, is that I think that we’re all but certain to see an increase in canola acres.”

Market response to the report was muted, with many traders being cautious due to not fully believing the report. Usually, according to Mike Jubinville of ProFarmer Canada in Winnipeg, when canola acreage decreases it is supportive to the market and contracts will jump by $10.

“The combination of not believing this number and the global marketplace under pressure means canola’s really having trouble responding bullishly to this,” he said.

If the lower canola acreage does come to fruition it will be good news for the market. Fewer canola acres will mean less carryover for canola stocks and provide a cushion for the marketplace.

However, Ball said, the prediction for a spring wheat acreage increase may have been based on the U.S. Department of Agriculture’s (USDA) acreage predictions.

In USDA’s prospective plantings report released last month, U.S. spring wheat acres were pegged to be at 12.7 million, compared to 11 million last year.

“Obviously growers are leaning back, possibly due to weather considerations, on a good part of the wheat areas,” Ball said. “At the time when these decisions were being made it was looking pretty dry in most of the spring wheat areas and they may have been leaning towards going back to more spring wheat acres.”

Overall traders and analysts say they expect the acreage numbers to be revised closer to their predictions when StatsCan releases new information in June.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow her at @AshleyMR1993 on Twitter.

Table: A recap of Statistics Canada’s 2018-19 acreage forecast as of March 31, 2018, in millions of acres, plus traders’ pre-report estimates for comparison.

* – “All wheat” includes spring wheat, durum wheat and winter wheat remaining after winterkill.

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