ICE weekly outlook: Easy come, easy go for canola

CNS Canada — The ICE Futures Canada canola market has been something of a maverick over the course of the week, bucking pressure from a stronger loonie and weaker soybeans, but traders could turn on the market in coming sessions, one analyst said.

“There’s certainly some commercial buying keeping it firm, but it may be speculative strength, and the speculators may turn on it at some point and drive it the other way,” said Ken Ball of PI Financial Corp in Winnipeg.

Since last week, canola prices have advanced close to $7 per tonne in the March and May contracts, far outpacing Chicago Board of Trade (CBOT) soybeans, which declined close to US20 cents in front contracts.

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“That’s quite substantial,” Ball said. “But the problem now is canola is starting to look a little expensive, and the spreaders might flip the other way and start selling canola.”

If traders start selling canola, the market might see sharp declines, especially as the Canadian dollar bounced higher in recent sessions, which hasn’t been fully priced in.

Though traders have been ignoring strength in the Canadian dollar moving forward, Ball expected currency action to keep investors’ interest.

A trade deal between the European Union and Canada is moving closer to completion, which could also have an effect on the market, Ball said.

“EU trade deal is an interesting announcement, it may be partly responsible for some buying in canola,” he said.

He tempered that hopefulness by adding that it’s “many, many months, even possibly years down the road before it’s implemented.”

The European Parliament’s trade committee on Tuesday endorsed the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). The deal is still subject to approval from the full European Parliament.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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