Glacier FarmMedia | MarketsFarm—Canola futures at the Intercontinental Exchange (ICE) followed the lead of vegetable oils during the first trading week of August, posting sharp losses despite seeing a modest correction on Aug. 7.
The November canola contract lost C$23.10 per tonne in that span, while September Chicago soyoil was down by 1.29 U.S. cents per pound.
Ken Ball of Ventum Financial Corp. of Winnipeg said it was a matter of canola prices following the lead of vegetable oils, especially Chicago soyoil.
“Canola did build in a C$50 to C$60 (per tonne) premium during those bad weather stretches in July, but nobody was sure whether to build onto that or not,” said Ken Ball of Ventum Financial Corp. of Winnipeg, adding “it has largely just been following the vegetable oils.”
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He said the trade is waiting until the size of this year’s canola crop in Western Canada is determined, which will be another price indicator.
“Nobody’s really too sure how big the crop is. We’re just waiting to see how the crop develops in August,” Ball said.
Canola conditions in Western Canada were very variable, according to him, ranging from 50 per cent losses reported in parts of Alberta to good to excellent conditions in Manitoba.
While weather could still have an effect on the canola crop, swathing has already begun in some canola fields. As a result, movement in vegetable oil prices will have the greater effect in the canola market.
“There’s chatter in the U.S. they might try to block out non-domestic sources of feedstocks for the biofuel industry. If that ever happened, (soyoil) would rally dramatically, but it’s been talked about for months and months,” Ball said.
If Statistics Canada reported this year’s canola crop at 18 million tonnes in its principal field crop estimates later this month, there will be an adequate supply with stocks drawn down according to Ball. At 17 million, there “would be a problem.”
But with corn, soybeans and wheat moving lower, Ball said there could be more downside for canola yet.
“It wouldn’t surprise me to see (canola) go a bit lower. The 40 U.S. cents per pound soyoil could hold, but it wouldn’t surprise me to see it go to 35 if it doesn’t get any news to support it,” he said.
