Canola futures lost about 1/4 percent (November contract -C$1.70 per tonne) as the weakness in soybean futures more than offset the continuing rally in world vegetable oil prices

Selling at the 50-day moving average contributed to the decline. However, much in the same way that spillover selling from the limit move in the corn market pulled soybean futures lower, canola prices were also likely impacted by traders looking to sell something correlated with corn even if the correlation was weak. Growing demand and concerns about areas of dryness in parts of the Canadian Prairies combined with buying below the critical psychological level of C$450 to limit the decline.

Rapeseed futures on the Matif exchange moved lower in mostly technically-driven trading with most contracts down about 1/4 percent (November contract – €0.75 per tonne). Selling at the 10-day moving average triggered the decline, but losses were limited by buying at the 50-day moving average.

USDA REPORT GENERALLY BULLISH FOR SOYBEAN OIL DRIVING FUNDS TO ADD TO LONG OIL SHARE POSITION

The United States Department of Agriculture (USDA) released its monthly World Agriculture Supply and Demand Estimates (WASDE) report on Monday. In the report, USDA reduced its estimate of U.S. planted acreage by 3.3 million acres from its Acreage report, released in June. USDA also decreased its projection of harvested area by 3.4 million acres to 75.9 million but left its yield projection unchanged at 48.5 bushels per acre. If USDA’s projections are realized they would represent the smallest U.S. soybean production and lowest harvested area since 2013/14. Soybean futures initially sold off but then rallied before selling drove prices down about 10 cents shortly after noon (CDT). Whether the selling was related to the USDA data, the limit move lower in corn futures, the improving weather outlook, or some combination fo all three is difficult to understand. Prices rallied during the last hour of trading, but still only moved about three cents above the low of the day by the close. Most contracts settled more than one percent lower (November contract -12 1/2 cents per bushel), but the losses were significantly smaller in the 2020/21 delivery months. With the USDA’s report out of the way, traders will return their focus to the weather and the potential for timely and beneficial rainfall over the next two weeks. If the weather forecast verifies, conditions will be supportive for crop development, and soybean futures may remain under some pressure. However, there will be many analysts and traders that will second guess USDA’s data, and if anecdotal reports from the field start to gain traction, soybean futures could rally.

Funds were reported sellers of 11,000 soybean contracts, 5,000 soybean meal contracts, and buyers of 6,000 soybean oil contracts.

Funds continued to buy soybean oil futures and drive prices higher with most contracts gaining a little more than 1/4 percent (December contract +10 basis points per pound) on Monday. USDA’s reduction in its 2018/19 U.S. crush forecast, which more than offset declining estimates in domestic soybean oil usage and reduced its projected ending stocks for both 2018/19 and 2019/20, contributed to the bullish sentiment in the soybean oil market. However, the main driver of the global vegetable oil rally continues to be the idea that Chinese buyers are going to need to make significant purchases of vegetable oil from exporting countries to offset shortages.

The palm oil market was closed on Monday in observance of a public holiday.

Vegetable oil futures on the Dalian exchange continued to rocket higher with palm oil futures gaining almost two percent (September contract +90 yuan per tonne) and soybean oil contracts gaining a little less than two percent (September contract +118 yuan per tonne). The rally drove the most-actively traded September contract above the 200-day moving average and pushed the September soybean oil contract to a life-of-contract high and above the psychologically important 6,000-yuan level. The sharp rally in prices and the removal of vegetable oils from the Ministry of Commerce’s tariff rate quota program suggest there is a significant shortage of vegetable oil in China and buyers may soon start to make substantial purchases from exporting countries.