Canola closed lower on farmer pricing and scale down export buying

The May canola contract closed down $1.60 cpmt at $353.70 and November closed down $1.40 on the session at $377.80 cpmt. Volume in Tuesday’s market was 9,571 contracts versus Monday’s volume of 9,455 contracts. The market was once again characterized by scale down Japanese buying and a small pick-up in farmer selling now that the cash bids on nearby delivery have fallen below the $8.00/bu. level. The stronger Canadian dollar was a negative factor in today’s session. A momentary high pressure system has stalled temporarily over the west coast and grain loading resumed yesterday and should be uninterrupted until tomorrow night when rain is forecast to return. Currently there are 220,000 mt of canola in the Vancouver vessel line-up, with 200,000 to be shipped between now and the first week of April. We have just finalized our World Canola/Rapeseed Production numbers (which will be in detailed form in this weekend’s biweekly report) and are forecasting production (outside of North America) to increase by 4.0-4.5 million tonnes versus last year. Canadian canola crush margins continue to improve as canola prices are pressured by the prospects of higher production at a time when canola oil values continue to improve. From a technical standpoint canola appears to be approaching an oversold condition, the major support on the May contract is at $340.00 would expect some evening up prior to the USDA seeding report at the end of the week.

The results of the Quebec election were friendly for the Canadian dollar. The loss of representation by the separatists and the resultant gain by the provincial conservatives is politically sound for Canada. Although the ruling party in Quebec is in a minority position they would much rather work with the conservatives rather than the separatists. With this type of landscape in Quebec we believe that the Federal Government is now in a better position to call an election this spring and seek a majority government by increasing their presence in Quebec. The new quasi provincial coalition government is in a position to support the Federalists in the election, certainly a win by the Federal Conservatives means payback time to Quebec. So what does this all mean? Firstly the Canadian dollar will be supported. Secondly the Federal Conservative Government, currently a minority, is in a much better position to rule, the opposition parties will lose representation if they force an election now. Therefore this clears the way for the vote on the barley export monopoly with the Canadian Wheat Board. If the Government denounces the Canadian Wheat Board monopoly on barley within the next 2 weeks and opens up the barley export market then there would be a larger swing to barley acres this spring and a fair portion of that switch will come out of canola acres.

The European Commission announced the acceptance of three new genetically modified rapeseed crops to be used in animal feeds and for industrial purposes only, in a statement from EU officials in Brussels today. The crops are known as Ms8, R13 and Ms8xR13. Processed oil derived from these GM crops had already been approved for food use in the EU. This goes a long way towards the acceptance of Canadian GM canola varieties for crushing purposes in the EU. In the past 2 years Canada has been exporting canola to 3rd countries where the oil is processed and exported it to the EU. The Commission remarked that strict labeling and monitoring procedures will apply, to avoid the cross contamination with conventional or organic varieties. While RoundUp Ready and Invigor canola have been approved by the EU it will be very difficult to move these varieties commercially into the EU. The challenge from Canada will to ensure an identity preserve program, which will entail segregation of these accepted varieties from the varieties that have not been accepted. From a commercial standpoint it is probably not feasible until all the approvals are in place, However it is certainly a step in the right direction.

Soybeans were lower on the day May soybean contract closed down 1 cent closing at $7.57 1/4 TheMay soy oil contract closed up 14 points at 31.81 The market danced around as traders position themselves in front of the USDA seeding report at the end of the week. The May soybean prices traded on an inside day range closing lower which is not necessarily a negative signal. Note that May soyoil had the same inside action in yesterday’s market and closed higher today. Fund buying sparked the soyoil market as well as the strength in the Palm oil market with the June contract closing above the physiological 2,000 ringgits level.

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