ICE weekly outlook: Challenging crop year ahead for canola

ICE November 2021 canola (candlesticks) with 20-, 50- and 100-day moving averages (light yellow, dark yellow, dark green lines). (Barchart)

MarketsFarm — With declines in canola following Statistics Canada’s bullish-leaning projections for acres, it’s becoming more difficult to determine which way prices will trend in coming weeks and months.

“Where are prices going to go? In any given year that’s challenging, especially in this year,” said David Derwin, analyst for PI Financial in Winnipeg.

“That has a lot to do with the weather, because very often these weather-driven rallies tend to peak at the end of June and the beginning of July.”

Very dry conditions across much of the Prairies have posed a challenge to canola producers this year. In some cases, it’s not only the topsoil that lacks sufficient moisture, but also the subsoil reserves.

While Statistics Canada has called for 21.5 million acres of canola to be seeded this spring, the dryness in Western Canada could lead to reduced yields if rain doesn’t come in time.

“Moisture at seeding time doesn’t make or break it. You can still have pretty good crops if you get good rains over the next few months after seeding,” Derwin said.

That, he said, brings producers to another factor: having patience while not being complacent.

“You want to be ready to look at hedging strategies. Options are playing a very important role in the marketing of grain this year, because it’s not just the price factor…but options can help manage the production risk and delivery commitment.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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