MarketsFarm — ICE Futures canola contracts saw a sharp downward correction in early trading days of May, after setting all-time highs in April.
While the correction was long overdue, underlying supportive influences remain in place and the market could be due for some sideways trade as participants now wait to get a better handle on new-crop seeding.
The futures recovered much of their lost ground on Wednesday, but the market may need some additional bullish fuel to retest its highs.
“The market’s pretty jittery right now,” said Ken Ball of PI Financial in Winnipeg, expecting the choppiness to continue through the seeding period and into June.
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On the one hand, while he saw the recent losses as a routine correction, he added that values were also already very high and may not need to set new highs.
“We could go higher if it hits the right things fall into place, particularly if North American crops get into some trouble,” said Ball.
While wet conditions have delayed seeding operations in Manitoba, and parts of the western Prairies remain on the dry side, he added most areas were off to a better start from a moisture perspective compared to 2021.
“I think we have enough moisture in most of North America for pretty decent spring germination, and that’s always half the battle in growing a crop,” said Ball.
Considering the underlying fundamentals of tight old-crop supplies, the canola market needs to see decent production in 2022.
Ball said demand will still need to be rationed, even with a larger crop, but noted that $800 per tonne could ration demand just as easily as $1,000 depending on what competing markets do.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
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