Canola prices have clawed their way slightly higher from the recent futures contracts lows established the last few days of February, according to Barry Coleman, executive director of the Northern Canola Growers Association.
“There are so many questions regarding the Canada-China relations and the U.S.-China relations that it is hard to adopt a bullish market view at this time,” Coleman said. “Oilseed supplies are not short and still the soft veg oil market will limit canola upside for now. Positive China-U.S. trade news could produce some brief spurts higher, but they look at such developments as an opportunity to sell canola rather than adopting a long-term bullish view of the market.”
In a normal market, soybeans and canola have a tight correlation, Coleman noted, with canola in a range of 110-113 percent of the soybean futures. However, at this time, canola is only 102 percent of that, which is the lowest it has been since 2011.
“The prospect that Chinese buying could slow has led to some heavy liquidations of long positions in the canola futures market,” he said. “Canola futures are $60 lower than they were a year ago at this time, and a lot of that is attributed to the political situation.”
The economic detriment to the farm economy in Canada due to lower canola prices is estimated at $300 million and the impact of the current trade situation in regard to canola in the U.S. is around $40 million, Coleman pointed out. This drag on the farm economy has caused the first Canadian crop acreage estimate to indicate a 7 percent decrease in canola acreage, from over 22 million acres down to under 21 million. Earlier this winter the Canadian acreage was expected to increase. On the U.S. side of the border, it was expected that acreage would increase, but Coleman feels those estimates will be tempered a little with the current market situation.
There is little positive news on the trade situation with China, according to Coleman. Earlier it was announced that negotiations would be wrapped up by March 1 and then it was delayed until March 30. Now the White House is saying it will be sometime in April when the trade situation will be resolved.
“It continues to be a no-news situation and that is extremely frustrating for the ag commodity world,” he said.
Local cash prices on a hundredweight basis are ranging from $15.67 to $16.70.