The Good: Canola markets have been in a funk over the past two weeks and today was looking no different than previous sessions. Buying interest came into the canola market at about 11:30 this morning which pushed the November contract to close at C$856.80 per tonne, which is just off of the daily high. There was no support from soybeans today as the market was off 33 to 34 cents per bushels on the day in Chicago. Soybean oil was also down as the nearby September contract was down by nearly two per cent. The supportive factor for the canola market were the continued deterioration of yield prospects across the Prairies. Crop estimates are dropping and the exportable supplies are becoming very tight. At least today started to reflect the fundamentals in the canola market.
The Bad: The wheat markets in North America are beginning to understand the implications of the spring wheat drought and the impact on domestic and exports of spring wheat. The conclusion the market is coming to is that the Kansas City futures contract is undervalued. The demand for HRW wheat is through the roof, with increased feed demand this quarter, mill demand which is lowering spring wheat in the grist and an improving outlook for HRW exports this year. Demand should be especially strong from Latin America this year as spring wheat exports will be limited. This resulted in HRW futures increasing by four cents per bushel today, while spring wheat dropped three to four cents per bushel. The September Minneapolis – Kansas City spread moved lower today and currently stands at US$2.12 per bushel.
The Ugly: The weather forecast has a break from the hot conditions this weekend in Western Canada as a system will push across the Prairies beginning on Friday and slowly moving eastward through the weekend. The rains are likely too late to increase yields substantially, but the respite looks to be short lived. The long term forecast through the middle of August is calling for a return to the hot weather over most of the Prairie region. These hot conditions will continue to stress crops as they begin to ripen in the central and northern Prairies.