North American Grain/Oilseed Review: Declining Canola Prices Amid Improving Yield Prospects

The ICE Futures canola market demonstrated a downward trend on Wednesday, due to the rising yield prospects and a lack of significant demand from end users.

This weakening trend in the Canadian oilseed market was further reinforced by the losses in Chicago soybeans, although soyoil demonstrated a mixed performance, and European rapeseed futures were stronger.

While certain regions of the Prairies are still grappling with dry conditions, numerous areas have received rainfall over the past week, leading to easing concerns about the state of the canola crop. In its latest weekly report, Manitoba confirmed that the majority of the canola in the province is in good condition. Concurrently, a softer tone in the Canadian dollar provided some underlying support.

On Wednesday, a total of 24,967 canola contracts were traded, compared to the 36,745 contracts traded the previous day. Out of the traded contracts, 13,256 were accounted for by spreading.

SOYBEAN futures at the Chicago Board of Trade also weakened on Wednesday. Forecasts predicting cooler and wetter conditions across most of the U.S. soybean-growing regions put pressure on the values. This bearish outlook counteracted the overnight strength driven by the conflict in Ukraine.

Initially, a Russian attack on Ukrainian grain handling facilities along the Danube River bolstered the grains and oilseeds, but this support diminished as the North American session progressed. Although the latest weekly report showed deteriorating condition ratings, traders are expecting stabilization or even improvement moving forward. Additionally, increasing production estimates from Brazil weighed down the prices.

In June, U.S. processors crushed 174.5 million bushels of soybeans, a figure below the average trade estimates. This increased pressure on CORN was compounded by favorable Corn Belt weather and chart-based positioning. Although an estimated 441.5 million bushels of corn were used for ethanol production in the U.S. in June – a figure slightly above average trade estimates – it still fell short of the usage for the same month the previous year.

Meanwhile, WHEAT was down in all three contracts, with the winter wheats bearing the largest losses. While initial support was provided by Russian attacks on Ukrainian grain facilities, wheat is still being transported from the region. Furthermore, U.S. wheat is considered overpriced compared to other sources, which negatively impacts its market position.