Dow Jones reports indicate ongoing concern surrounding Canada's canola exports to China, with a Wednesday's report indicating "political tensions between Canada and China have stopped China from buying Canadian canola, according to market participants." This comes as the nearby March contract reached its lowest level seen in nearly four weeks, or since Jan. 18, while inching towards the Jan. 15 low of $475/metric ton.
The most recent CFTC data shows investors or noncommercial traders holding a bearish net-short position in 23 of the past 25 weeks, as of Jan. 15 data, with reported data slowly recovering to current dates with bi-weekly reports in place due to the recent U.S. government shutdown. As well, the nearby March/May spread continues to reflect a bearish view of market fundamentals.
As of week 27 data, or the week ending Feb. 3, canola exports through licensed facilities totaled 5.2366 million metric tons, down 378,700 mt or 6.7% from the same period last crop year. This is troublesome given recent Statistics Canada data that estimates record Dec. 31 canola stocks of 14.6 mmt. This is the lowest week 27 exported volume reported in three years.
Over the past five years, an average of 48.5% of total crop year exports have been realized in reported week 27 licensed exports, an average pace that projects to total 2018/19 exports of 10.8 mmt, slightly below the current AAFC forecast of 11 mmt.
As seen on the attached chart, Canadian Grain Commission data as of December shows exports to China ahead of last year's pace, with 2018-19 monthly volumes higher than achieved in 2017-18 in four of the first five months of the crop year. Total exports to China are shown at 2.138 mmt in the August-through-December period, up 479,600 mt or 28.9% from the same period in the previous crop year.
In 2017-18, the lowest monthly volume of Canadian exports to China was realized in February at 242,800 mt, while this volume increased for three consecutive months to a crop year high of 542,300 mt in May, reflecting 58.1% of the month's total exported volume.
While the first five months of the current crop year show favorable data for 2018-19 as compared to the previous crop year, exports to China were more heavily weighted in the last half of the crop year in 2017-18, which may be in jeopardy.
The current slowing in movement of canola to China comes at a time when China is increasing their imports of U.S. soybeans while also trimming their overall demand.
Cliff Jamieson can be reached at firstname.lastname@example.org
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