Canada Markets

March canola flashed a warning on Friday, slumping to a fresh contract low and lowest close during the life of the contract. The nearby March contract ended $12.60/metric ton (mt) lower at $618.90/mt. This week's $34.50/mt loss marks an eighth consecutive lower weekly close, while also the largest weekly loss seen during the last eight weeks.

Both the May and the July contract faced the same situation, reaching fresh contract lows and the lowest close seen during the life of the contract.

For now, the days are gone where you can look at the current Agricultural and Agri-Food Canada (AAFC) estimate of 20 million metric tons (mmt) of supplies and say we need 10 mmt for exports, another 10 mmt for crush, and we are in trouble.

The March/May futures spread closed at minus $7.90/mt, having weakened $0.20/mt over the week, a modest change. This compares to the plus $2.70/mt spread or inverse reported for the same date last year, the plus $11.20/mt three-year average and the plus $3.26/mt five-year average.

Trade was light during the week, with the holiday season lull having an effect. A reported 66,441 contracts traded this week, up from 49,603 contracts traded during the week between Christmas and New Years, while down 29% from the four-week average of 93,989 contracts.

Today's CFTC Commitment of Traders report, summarizing statistics for the week ending Jan. 2, shows the bearish noncommercial net-short position falling for a second week to 110,267 contracts net-short, a modest change from the record 118,760 contracts reported two weeks ago. While this group pared this position slightly in the latest week, the focus remains on the short side of the trade late in the week.

At the same time, commercial traders pared their net-long futures position slightly to 110,529 contracts. This remains relatively close to the record 118,690 contracts reported two weeks ago. While a supportive feature, this activity remains no match when compared to the actions of speculative sellers.

The Canadian Grain Commission's combined week 21 and 22 grain handling statistics, covering activity for the week ending Dec. 31, reports a weak 82,500 mt of exports. Even when the two weeks are combined, this represents the smallest volume shipped in over six weeks and far from a boost of confidence when it comes to 2023-24 potential. The hope is that lower prices will become enticing to potential buyers. At the same time, the ICE Exchange reported the track Vancouver cash basis weakening by $4/mt to $38/mt over the March contract, yet another unhealthy sign, this time in the cash trade.

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

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

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