ICE weekly outlook: New-crop canola to break $500

(Dave Bedard photo)

CNS Canada — The ICE Futures Canada canola market moved higher during the week ended Wednesday, rebounding after the November contract hit support levels earlier on Monday.

With recent drought and frost in Western Canada, canola ending stocks are expected to be very tight at the end of 2015-16, which is supporting prices and could push new-crop futures above $500 per tonne in the coming weeks, according to an analyst.

“It’s a bit of a struggle at $500 (per tonne); we have to go through that. I don’t think it’s a slam dunk that we’re going to suddenly slice through. But, it’s coming,” said Errol Anderson of ProMarket Communications in Calgary.

“And, once we finally break $500 per tonne, that resistance I think will become a floor. I’m sort of sensing a $500 floor, and possibly aim toward $525 basis November.”

Strength in the Chicago soybean market seen during the week was also underpinning canola, with support coming from concerns about wet weather causing some soybean fields in the U.S. to go unseeded.

Soybeans could also remain strong in coming weeks, as traders will need to work in weather premiums when the hot summer weather arrives in the U.S. Midwest, Anderson said.

The fundamental situations are very different for canola and soybeans, as global supplies of beans remain very large.

“Canola is going to divorce itself a little bit from the soybeans,” Anderson said. “If the beans drop, canola won’t drop that much; it will get support quite quickly.”

The canola market could also move back down to support levels of about $480 per tonne in the November contract if there’s a soaking rain that hits Alberta and Saskatchewan, relieving some of the drought-stricken fields.

Even if that happens, crop production will still be down in Western Canada this year — we’ll just have to wait and see by how much, Anderson said.

Statistics Canada will release an updated estimate on 2015-16 Canadian crop acreage on June 30, which could give a clearer picture of upcoming production. The report could also provide some direction for the canola market.

“If we see a number closer to 18 million acres, that would be quite supportive,” said Anderson.

In its late April report, StatsCan pegged 2015-16 Canadian canola area at 19.4 million acres.

Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.


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