Canola futures extended their rebound after Canada, citing disease and weather setbacks, ditched expectations of a rise in its harvest of the oilseed – pegging production 1.6m tonnes short of market forecasts.

Statistics Canada also estimated the domestic wheat crop a little shy of forecasts by investors, and by the US Department of Agriculture, whose data set world benchmarks.

Canada's canola harvest this year reached 13.4m tonnes, down 1.3m tonnes year on year, despite a rise of 1m hectares in sowings, StatsCan data showed.

The result, which came in well short of market forecasts of a 15m-tonne harvest, reflected a collapse in yields to 28.2 bushels per acre, blamed in part on late-season weather setbacks.

The immediate market reaction was to send canola futures for November delivery 3.2% higher to Can$613.50 a tonne,

In Paris, November futures in rapeseed, the sister oilseed, rose by 2.3% to E476.50 a tonne, taking aim at its first positive close this week, and helped too by a positive performance elsewhere in the complex by soybeans.

Disease pressure

Canada's canola crop suffered heavy losses when, after being swathed in preparation for harvesting, it was hit by strong winds which fractured brittle pods and scattered seed.

While potentially exacerbated by weather, many observers believe that disease in Canadian canola has also been exacerbated by growers ignoring usual best agronomic practice and planting successive crops in the same field.

In Europe, ignoring rotation in rapeseed is known to encourage the build-up of diseases such as sclerotinia, a fungus whose spores can survive in soil for up to four years.

However, Canada's practice has, until now, paid off for growers, who have enjoyed strong returns, encouraging them to continue to lift sowings to a record 8.6m hectares this year.

Export capacity

Thursday's data raise doubts over Canada's ability to keep exports above 8m tonnes in 2012-13, as forecast by both domestic and US farm ministries, given the rising capacity of its domestic crushers and depleted inventories.

This is at a time when world production has been constrained by the latest in a series of disappointing European harvests, while demand for rapeseed is being underpinned by drought hit harvests of fellow oilseed soybeans.

StatsCan's estimate of the Canadian wheat crop, at 26.7m tonnes, also fell below market expectations, of 27.1m tonnes.

The downgrade from the previous forecast of 27.0m tonnes reflected a lower yield estimate.

Oilseed price revival

On the markets, canola futures had lost some ground by late morning in Winnipeg to stand at Can$611.00 a tonne, a gain of 2.8% on the day.

Paris rapeseed futures stood at E478.75 a tonne, a similar gain.

The rises were ahead of a 2.1% rise in Chicago soybeans, which were boosted by data showing weekly export sales of 1.3m tonnes of the oilseed, well above market expectations.