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Bearish factors for U.S. soy trump supports for canola

ICE Futures Canada canola contracts ran into upside resistance during the week ended May 12, as the commodity’s own supportive fundamentals were countered by the much more bearish outlook for U.S. soybeans.

Canadian canola supplies are looking rather tight, with Statistics Canada showing only 6.6 million tonnes in the country as of March 31. That’s about two million tonnes lower than at the same time the previous year, which means exports and the domestic crush will need to slow down or supplies will run out.

Both exports and the domestic crush are running well ahead of the year-ago pace, with exports of 8.6 million tonnes and a crush of 7.2 million tonnes (as of May 7, according to the Canadian Grain Commission), each about 800,000 tonnes ahead of what had moved through the system at the same point in 2016.

ationing that demand could lead to price spikes over the next few months if any buyers get caught short. On top of that, concerns over last year’s unharvested fields and this year’s seeding delays add another layer of support.

Estimates vary, but a significant number of acres in Western Canada still must be cleaned up from 2016. In some cases no crop will be salvaged, and the clock is running out for getting fields in a state to seed something new for 2017.

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