Canada Markets

Canola Prices Struggle to Extend Gains

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
@CliffJamieson
January canola gained as much as $11/mt on Dec. 8 but changed direction following the USDA release. The first study shows stochastic momentum indicators in oversold territory. The brown line on the second study shows the Jan/March futures spread narrowing to $7/mt during the week, while the histogram bars on the lower study shows noncommercial traders increasing their bearish net-short positions for the first time in five weeks. (DTN ProphetX chart)
January canola gained as much as $11/mt on Dec. 8 but changed direction following the USDA release. The first study shows stochastic momentum indicators in oversold territory. The brown line on the second study shows the Jan/March futures spread narrowing to $7/mt during the week, while the histogram bars on the lower study shows noncommercial traders increasing their bearish net-short positions for the first time in five weeks. (DTN ProphetX chart)

Dec. 8 trade showed canola prices poised for a second consecutive higher close but today's USDA December World Agricultural Supply and Demand Estimates (WASDE) report release weighed on oilseeds and vegetable oil trade.

After trading as much as $11/metric ton (mt) higher this session, a move that followed the $16.70/mt rally achieved on Thursday, the canola market could not escape the wide-spread selling that weighed on the soy complex.

As seen in the lower study, noncommercial traders reversed their recent trend in the week ending Dec. 5, increasing their bearish net-short position in canola futures for the first time in five weeks, while to a net-short of 97,463 contracts, the fourth-largest net-short position reported on record. Speculative traders continue to focus on trade from the short side, and this bears watching; they may not be right.

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The Canadian Grain Commission's week 18 Grain Statistics Weekly shows 132,700 mt exported in the week ending Dec. 3, below the volume needed this week to stay on track to reach the current Agriculture and Agri-Food Canada (AAFC) forecast. This follows week 17 data that showed a disappointing volume shipped for the second time in four weeks at just 87,000 mt.

The CGC also released the October Exports of Canadian Grain and Wheat Flour report today. This report shows 864,000 mt of canola exported in October, with 81% of this volume destined for China. During the first three months of 2023-24, 1.5945 million metric tons (mmt) has been exported, down only 2.2% from the same period in 2022-23, while cumulative exports to China are up 35% year-over-year in the first quarter of the crop year. The USDA is currently forecasting China's crop year imports at 3.4 mmt for 2023-24, down 36.3% from 2022-23 (Oct-Sept).

It's interesting to go back one year to the USDA's forecast as seen in Oilseeds: World Markets and Trade report. In December 2022, China's rapeseed/canola imports for 2022-23 were estimated at 2.5 mmt. By February this was hiked to 3.2 mmt, to 3.4 mmt in April and 3.8 mmt in May. In July this forecast was revised higher to 4.7 mmt, to 5.1 mmt in Sept and by November, this forecast reached a high of 5.335 mmt.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on X, formerly known as Twitter, @CliffJamieson

Cliff Jamieson can be reached at cliff.jamieson@dtn.com.

Follow him on X, formerly known as Twitter, @CliffJamieson.

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January canola gained as much as $11/mt on Dec. 8 but changed direction following the USDA release. The first study shows stochastic momentum indicators in oversold territory. The brown line on the second study shows the Jan/March futures spread narrowing to $7/mt during the week, while the histogram bars on the lower study shows noncommercial traders increasing their bearish net-short positions for the first time in five weeks. (DTN ProphetX chart) 
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