MarketsFarm — The ICE Futures canola market moved steadily higher during the week ended Wednesday, hitting its strongest levels in more than four months as bullish chart signals and production uncertainty across the Prairies provided support.
A bearish reaction in the Chicago soy complex to the latest supply/demand estimates (WASDE) from the U.S. Department of Agriculture did little to stall the upward trend in canola, with the Canadian market continuing to show some independent strength despite the losses in soybeans and soyoil.
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November canola hit a contract high of $806.90 per tonne on Wednesday, but settled just below $800.
In addition to chart-based positioning, much of the strength in canola was tied to concerns over the state of the Canadian crop, according to MarketsFarm analyst Mike Jubinville. He said canola yields were unlikely to hit the 42 bushels per acre trendline, with 38 or lower more likely given the current dryness.
Jubinville said there was more room to the upside in canola from a technical standpoint, with demand rationing also supportive.
However, he added, a serious downward correction in the soy complex would likely spill over to the canola market.
While USDA’s decision to leave average soybean yields at an all-time record of 52 bu./ac. in Wednesday’s report was bearish, Jubinville expected the government agency was just being conservative with downward revisions to the size of the U.S. soybean crop likely in subsequent reports.
“The USDA has a way of inching towards what the real number is,” he said.
“I don’t think this creates a lasting trend in the soy complex and (the market) will immediately go back to trading weather.”
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
