ICE weekly outlook: Canola backs away from lofty heights

CNS Canada — It was a busy week for canola contracts on ICE Futures Canada as the most-active July contract rocked and rolled between $530 and $540 per tonne before settling Wednesday at the $528 mark.

The last time the dominant canola contract was above the $535 mark was in November last year.

Commercial interest, the faltering soybean crop in South America and speculative buying were some of the key factors propping up the market.

As well, one market analyst in Winnipeg said the most recent U.S. Department of Agriculture report provided a spark.

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“There was momentum (given to canola) from the last USDA report,” said Jonathon Driedger of FarmLink Marketing Solutions in Winnipeg.

The agency on Tuesday released its monthly supply/demand estimates, in which it forecast a drop in 2017-18 U.S. soybean ending stocks by five million bushels, which lent support to canola.

However, the rapidly rising Canadian dollar has provided some resistance to canola, as it makes the commodity less attractive to international buyers.

Contracts are running into technical resistance as well, Driedger said.

“We’re pushing into some levels (on old-crop contracts) that have shown pretty strong resistance in the past,” he noted.

Exports are also moving slower than last year, according to Ken Ball of PI Financial, also in Winnipeg.

That has prompted speculators to trade a lot of spreads, he said.

“Speculative spreaders are pushing long canola, short soyoil spreads pretty heavily,” he said.

Crush margins have been near their lowest levels this season as a result of the Canadian dollar/soyoil activity.

When it comes to weather, most farmers want to see some warmer air move in soon.

“I don’t think anyone is panicking,” said Driedger. “But if it stays cold then the level of nervousness may creep higher.”

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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