The net managed money short position in canola futures came in at 115,643 contracts as of Dec. 3 (9,546 long/125,189 short), up by roughly 31,000 contracts from the previous week. Open interest in the canola market climbed by 24,768 on the week at 298,227 contracts.

At the Chicago Board of Trade, the net short position in soybeans was down by about 13,000 contracts to come in at around 45,500. Meanwhile, the net long position in soyoil was down by about 14,000 contracts, at 7,300.

The net long position in corn was down by 10,000 contracts to come in at roughly 73,200.

In wheat, the Chicago soft wheat market reported a net short position of 70,900 contracts. The net short in Kansas City hard red winter wheat came in at roughly 39,500 contracts.

In Minneapolis spring wheat, managed money traders were holding a net short of around 32,150 contracts as of Dec. 3. That marked the largest net short in spring wheat on record going back to 2006.

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The canola trade between the two countries is worth about $2 billion (C$2.81 billion) a year, but lower imports by China, the world’s biggest canola importer, could further squeeze ICE canola futures RSF5, which have dropped more than 10 per cent in the past month.

China has sufficient canola supply for the coming months, but Canadian oilseed farmers face a double whammy as its reduced buys coincide with import tariff threats by U.S. President-elect Donald Trump, including canola, traders and analysts said.

“China has yet to impose any duties but it already has a desired impact as buying of Canadian canola has come to a standstill,” said a trader with an international company that sells oilseeds to China.

“As of now, supply of canola in China is sufficient, with large imports in the past months.”

Oilseed buyers in China have been shipping Canadian canola at a record pace since September to take delivery of cargoes contracted before Beijing unveiled an anti-dumping investigation into Canadian imports of the oilseed, in retaliation to Ottawa’s tariffs on Chinese-made electric vehicles.

Buyers in China have booked to ship just about 250,000 metric tons of Canadian canola, also called rapeseed, for December shipment, two Singapore-based oilseed traders said, after taking around 500,000 tons in November and 863,000 tons in October.

“Buyers have been busy ensuring they ship the cargoes booked before Beijing’s announcement and before actual duties come into force,” the second trader said.

Canola is crushed to produce cooking oil and other products, including renewable fuels, and meal for animal feed.

China also has plentiful supplies of soybeans to bridge any shortfall in availability of canola, however, traders said.

“Some domestic rapeseed crushing plants have been forced to change to crush soybeans,” said Gan Quankun, director of agriculture products with trading company Zhangchiyoudao Asset Management in the commercial hub of Shanghai.

“Mainly because you (importers) are worried about policy risks, so you don’t dare to import rapeseed.”

While Chinese crushers are switching, retail demand for canola oil is likely to persist as many consumers prefer it to alternatives, despite its higher price.

China has enough stocks of canola to last until February, traders said, with buyers likely to switch to other origins, including Australia, in 2025.

China imported 5.074 million metric tons of canola between January and October this year, up from 4.27 million a year ago, customs data shows. That includes 4.84 million tons from Canada, 184,555 tons from Russia and 46,366 tons from Mongolia.

—Additional reporting by Ed White in Winnnipeg

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Oilseed markets have moved lower during the growing season mostly due to record production prospects for the U.S. soybean crop. The U.S. Department of Agriculture is currently estimating the soybean crop at 4.59 billion bushels which is an all-time record. The average soybean yield is 53.2 bushels per acre which is also a record for the U.S. This production increase is expected to push U.S. soybean ending stocks to 560 million bushels which is up by 215 million bushels from the 2023-24 marketing year. The large ending stocks of soybeans are driving futures prices lower for all oilseed crops. USDA is projecting a drop in farmgate soybean prices by US$1.70 per bushel, to US$10.80 per bushel. For reference, the average soybean farmgate price in the 2022-23 crop year was a record US$14.20 per bushel.

Canola prospects in Western Canada are not as rosy as those for U.S. soybeans. After a good start to the growing season, canola yields in Western Canada have moved from above average, in early July, to average. Prices have not reflected the deteriorating conditions for the canola crop as the nearby ICE November contract is off by more than C$100 per tonne from the end of June. Most of the losses in canola can be traced to the weakness in the U.S. soybean market.

Grain markets have also been pressured by favourable growing conditions in the U.S. Corn Belt. Corn production is forecast by USDA to reach 15.15 billion bushels, which is slightly lower than last year. More concerning for the market is that ending stocks are forecast to hit 2.07 billion bushels. This is driving the estimate of the average farmgate price for corn this year to US$4.20 per bushel. The average farmgate price in the 2022-23 crop year was US$6.54. The dramatic drop in corn prices is impacting Canadian feed grain markets. Feed barley prices are struggling in face of strong competition from imported U.S. corn. Corn has also been partially responsible for pulling wheat prices lower. With a large corn crop on the way, wheat will have a difficult time to rally significantly.

Spring wheat markets have been trading lower since the seeding of the 2024 crop was completed in late May. U.S. wheat production is expected to recover this year with production reaching just under two billion bushels. Spring wheat output is also expected to increase by 31 million bushels from last year to 499 million bushels. Wheat ending stocks in the U.S. are expected to increase by over 126 million bushels, to 828 million bushels. The increase in ending stocks in the U.S. is only part of the picture for the global wheat market.

Global wheat production is expected to hit yet another record of 798.3 million tonnes. Wheat ending stocks are also expected to increase to 256.6 million tonnes. The major wheat exporter situation is more constructive for wheat prices with ending stocks forecast to drop by 4.6 million tonnes, to 53.7 million tonnes. This lowers the stocks-to-use ratio to 13.2 per cent, which is the lowest level in over 10 years. Wheat stocks in the major exporters are not burdensome and in fact have become relatively tight. Wheat markets seem to be very comfortable with the lower stocks in the major exporting countries.

The negative sentiment in the markets has been exacerbated by the bearish stance of managed money funds that are holding record-short positions in spring wheat, canola, soybeans and corn. There are many reasons for the funds to hold short positions in the commodity markets, but the main concern seems to be that a slowing economy will slow demand for all agricultural commodities. The potential for slowing demand combined with large U.S. crops have resulted in the record short position. A rally in the agriculture commodity markets will only occur when the funds unwind their current short position.

It may seem counterintuitive that Canadian production is declining, and prices still refuse to rally. Large crops south of the border are overwhelming the impact of the production losses in Canada and have been pressuring prices. Just remember that the corn carryout in the U.S. is over 50 million tonnes, which is approximately the size of Canadian wheat and canola production. Until the U.S. situation becomes less burdensome for corn, soybeans and wheat, Canadian prices will have a hard time rallying.

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The November contract gained C$18.20 per tonne from the previous week to close at C$595.80 on Aug. 28, despite losing C$3.20 that day.

Jerry Klassen of Resilient Capital in Winnipeg explained that increased foreign and domestic demand, as well as higher vegetable and crude oil prices and crush margins, helped raise prices for the oilseed.

“Last week, China was buying a lot of U.S. soybeans. (I can’t confirm but) usually, they buy canola at the same time,” he said. “I think there were some ideas (from the trade) there was some export business being done … Overall, you have all these factors pulling the canola market prior to the StatCan report.”

StatCan estimated Canada’s canola crop to total 19.502 million tonnes for the 2024-25 crop year, compared to the revised figure of 19.192 million in 2023-24. Klassen said the trade considers StatCan’s August estimates as “a stab in the dark” while it waits for more information as the canola harvest progresses.

“The early yield reports (in Alberta) don’t really reflect what StatCan said. Now in eastern Saskatchewan and Manitoba, I think there are some growers who are expecting record-type yields,” he added. “This year, more than ever, it’s not like there were blanket conditions across the Prairies … To say that 19.5 million is too high or too low, at this stage, I think it’s a premature guess at the high end of trade estimates.”

Klassen added that while StatCan may have accurately pegged canola yields in Saskatchewan and Manitoba, the agency tends to overestimate yields in drier areas, such as Alberta this year.

“Because (the modelling) was done in July, I think we saw (Alberta’s canola) crop was in severe deterioration at the time, but we probably didn’t get the full extent in Alberta,” he said.

The trade may be treating the StatCan report as bearish, realizing it may have underestimated yields in Saskatchewan and Manitoba, according to Klassen.

“(The trade) is probably thinking this number’s going to grow a bit until the December report,” he said.

Average quality should be expected for most of Canada’s canola crop and with the November/January spread currently exceeding C$10/tonne, Klassen said it’s a sign that there are no concerns over supply.

“It tells us that crushers have pretty good coverage for the next two or three months and commercial stocks are pretty high for this time of year,” he added. “Everybody’s kind of bearish on the market here because we’re going into harvest and new canola is entering the system. That’s going to keep the spreads wide, that’s going to keep the basis under pressure and that’s going to be negative for the futures.”

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On Aug. 20, AAFC issued its monthly supply and demand estimates which showed the feed waste and dockage for 2023/24 canola at a mere 74,000 tonnes. That’s a drop from the 692,000 tonnes in 2022/23 and that for 2024/25 was projected to be 347,000 tonnes.

“Everybody is looking at that [2023/24 number] saying where did they get that from?”, Ball stated, noting the end of season stocks report could clarify AAFC’s data. He called the stocks report a sort of “a report card on other reports.”

“That feed waste and dockage number is a little bit of a warning that there’s more canola out there than we think,” the broker added.

As for StatCan’s upcoming report on principal field crops, Ball commented there’s little reason to put any faith into the document.

“I don’t know anybody who has a great amount of faith it’s going to tell us very much,” he said. “Data gathered at the end of July…how a non-surveyed report could take a month to get out? It will give us a limited amount of information.”

“The confidence level in these model reports is still extremely low in the industry,” Ball continued.

In turn that has created a situation where no one really knows how much canola will come off of Canadian fields in 2024/25. Currently, AAFC pegged production at 18.63 million tonnes, based on data from StatCan. Some analysts and traders suggested the crop could reach or exceed 20 million tonnes, but dry weather at the blooming stage may have eroded that expectation. Meanwhile, the United States Department of Agriculture estimated the coming Canadian canola harvest at the 20 million-tonne mark.

As for the pending labour dispute at Canadian National Railway and Canadian Pacific Kansas City, Ball suggested canola prices could go either way. He said pressure from domestic buyers could pulled prices lower. However, should export demand suddenly spike, that could drive up values.

Federal Labour Minister Steven MacKinnon met with CN, CPKC as well as the Teamsters Canada Rail Conference on Aug. 21 in a last-ditch effort to stave a work stoppage that was set to begin at midnight.

Should a strike by the Teamsters’ 9,300 members proceed, or the railways lock them out, it would mark the first time CPKC and CN were brought to a halt at the same time. Reports estimated the stoppage could cost the Canadian economy approximately C$1 billion per day.

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The November contract hit a low of C$565.50 per tonne during the week, before oversold sentiment came forward and profit-taking helped take values off that chart support.

If prices drop below the weekly low “that opens the door for (a move to) the 2018 to 2020 price ranges… which is not that long ago,” said Jamie Wilton, Commodity Futures Specialist with RJ O’Brien in Winnipeg.

The nearby canola futures held within a relatively sideways trading range during that timeframe of about C$430 to C$540 per tonne, and Wilton said it was still much too early to say that the lows were in for canola at current price levels.

He added that pressure was coming from the favourable state of the U.S. soybeans, with the bottom of the market often found just ahead of harvest. Looking forward, Wilton expected the market would be paying close attention to how yields come in at harvest time to see how the reality matches up with the predictions.

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November canola futures hit a contract low of C$585.00 per tonne on Aug. 6, while domestic wheat bids fell to their lowest levels in years as the U.S. futures traded near their softest levels since 2020.

A lack of any significant weather threats across the Midwest was likely to keep the bias pointed lower in the U.S. soybean, corn and wheat futures until something changes the narrative, according to Sean Lusk of Walsh Trading in Chicago. Soybeans in the U.S. were rated 68 per cent good-to-excellent as of Aug. 5 by the U.S. Department of Agriculture, which compares with only 54 per cent at the same time the previous year. Corn was in similar shape at 67 per cent good-to-excellent, marking a 10-point improvement on the year.

“There’s no story here to drive (futures) significantly higher… we need a story,” said Lusk, adding “if we turn hot and dry for the rest of the month that would bend this thing back up, but there’s nobody calling for that.” Even if it does turn dry, at this point of the growing season he noted soybeans were already setting pods and corn is past the pollination stage.

Eventually speculators will look to take profits and cover their short positions, but Lusk noted that every previous attempt at correcting higher was met with renewed selling and he expected a sustained rally was unlikely in the absence of fresh weather concerns.

While Western Canada also started the growing season on a relatively favourable footing, conditions have deteriorated – especially in parts of Alberta and Saskatchewan. The provincial crop report from Saskatchewan for the week ended Aug. 5 pointed to a decline in yield potential for many commodities.

“At one point we were looking at a record crop, but it’s probably closer to average now,” said Lawrence Klusa, president of Seges Markets in Winnipeg, pointing to the lack of rain in many growing regions over the past month. However, he added that the expectations for large U.S. soybean supplies, slow U.S. export sales, and weakness in crude oil were all weighing on the oilseed markets in general.

“There’s a recognition that canola will not be the crop it was, at least not what people thought it would be even a few weeks ago,” said MarketsFarm analyst Mike Jubinville.

However, “if canola has a problem, it’s a soybean problem not a canola problem,” said Jubinville adding “as long as the soybeans are sluggish it will be difficult to maintain a rally in canola.” He added that the 2023/24 canola crop was possibly understated by as much as 500,000 tonnes by Statistics Canada.

While the bearish influence of the soybean market was weighing on canola, the price weakness should be making Canadian exports look more competitive to international buyers. Problems with the rapeseed crop in Europe could also be supportive going forward, according to Klusa.

Wheat crops in Europe were also being hurt by excoff. Although, “for right now, there seems to be sufficient (wheat) supply relative to demand,” according to essive moisture, with the two Canadian analysts expecting the wheat market could be showing signs of leveling Jubinville.

“The upside potential is not great in the major crops, (but) there might be more hope in some of the special crops,” said Klusa pointing to pulses and durum as markets with possible room for some relative strength as Canada is a major player in the world markets for those commodities.

However, while durum should maintain a premium over spring wheat, he cautioned that prices were unlikely to see the same strength as they did a year ago.

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The November canola contract lost C$23.10 per tonne in that span, while September Chicago soyoil was down by 1.29 U.S. cents per pound.

Ken Ball of Ventum Financial Corp. of Winnipeg said it was a matter of canola prices following the lead of vegetable oils, especially Chicago soyoil.

“Canola did build in a C$50 to C$60 (per tonne) premium during those bad weather stretches in July, but nobody was sure whether to build onto that or not,” said Ken Ball of Ventum Financial Corp. of Winnipeg, adding “it has largely just been following the vegetable oils.”

He said the trade is waiting until the size of this year’s canola crop in Western Canada is determined, which will be another price indicator.

“Nobody’s really too sure how big the crop is. We’re just waiting to see how the crop develops in August,” Ball said.
Canola conditions in Western Canada were very variable, according to him, ranging from 50 per cent losses reported in parts of Alberta to good to excellent conditions in Manitoba.

While weather could still have an effect on the canola crop, swathing has already begun in some canola fields. As a result, movement in vegetable oil prices will have the greater effect in the canola market.

“There’s chatter in the U.S. they might try to block out non-domestic sources of feedstocks for the biofuel industry. If that ever happened, (soyoil) would rally dramatically, but it’s been talked about for months and months,” Ball said.

If Statistics Canada reported this year’s canola crop at 18 million tonnes in its principal field crop estimates later this month, there will be an adequate supply with stocks drawn down according to Ball. At 17 million, there “would be a problem.”

But with corn, soybeans and wheat moving lower, Ball said there could be more downside for canola yet.
“It wouldn’t surprise me to see (canola) go a bit lower. The 40 U.S. cents per pound soyoil could hold, but it wouldn’t surprise me to see it go to 35 if it doesn’t get any news to support it,” he said.

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While the November contract gained C$6.20 per tonne during the day of July 31, the price was still down C$47.70 from the week before at C$623.90.

Winnipeg-based analyst Bill Craddock said that an influx of funds selling canola short brought the oilseed down in the midst of bearish yield projections. Weakness in the Chicago soy complex also contributed to canola’s losses.

However, he was a bit nonplussed as to why the oilseed was trying to make a recovery. Nevertheless, he believes crop conditions could be the cause.

“We lost crush value after (canola was) the lowest in quite some time. I’m not quite sure what the rationale (was),” Craddock said. “I really don’t see anything other than the (canola) crop might not be as great as people think it is … Canola is still looking good, but the majority of the fields are green. But there are still some fields that are 20 to 30 per cent flowers.”

Craddock also observed that early canola fields seemed to withstand excess moisture much better than late fields.
He doesn’t think there will be much upside for canola prices in the coming days, as he maintained that canola was still overpriced.

“My opinion is that it will be C$40 per tonne lower when it’s closer to harvest,” Craddock said.

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The recent heatwave across Western Canada has adversely affected canola yields in the drier areas of the region as well as later planted crops as canola blooms were unable to withstand the heat.

Tryhuk said canola is currently too expensive to effectively compete with the Chicago soy complex, Malaysian palm oil or European rapeseed.

“China is the only game in town,” Tryhuk stated, noting that other major customers have slashed their canola imports in 2023/24.

The most recent data from the Canadian Grain Commission, which as of May, has China’s canola imports at 3.84 million tonnes in 2023/24, down from 4.22 million the previous year. Japan reduced its intake to 725,000 tonnes from 961,700; Mexico chopped its import to 466,000 tonnes from 1.08 million; the United Arab Emirates slipped to 155,700 tonnes from 169,000; and Pakistan was at zero versus 267,000 tonnes this time last year.

“We’re not doing anyone any favours by being up at $680,” Tryhuk remarked, pointing to a strong prospect of good soybean yields in the United States come harvest time.

Mixture of hot temperatures across the Prairies and short covering by the speculative funds combined to drive canola well passed its resistance levels. But the Canadian oilseed, once very competitive with its rivals had shifted to a rather unfavourable position.

Tryhuk suggested 2024/25 ending stocks could be much higher than the current forecast by Agriculture and Agri-Food Canada of 2.10 million tonnes.

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