ICE weekly outlook: Sideways canola looks for direction

CNS Canada — ICE Futures Canada canola contracts remain stuck in a sideways trading pattern, with little hint of which way values will eventually break.

Canola “is getting tugged from different sources,” said Ken Ball of PI Financial in Winnipeg, adding that “it could go up or down $5 depending on what happens around it.”

Some direction could come from the South American soybean crop, with traders waiting to see how the situation in Brazil and Argentina evolves.

Some good weather is still needed in Argentina, Ball said, but added it’s “getting to the point where the odds of major losses diminish.”

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One possibly supportive wild card is soyoil, according to Ball. While soyoil futures at the Chicago Board of Trade moved lower over the past week, he said tariffs on incoming biofuels to the U.S. and a downward revision to the ending stocks projection from the U.S. Department of Agriculture look constructive.

While canola is down from its nearby highs hit back in December, Ball said the commodity is still relatively expensive compared to other oilseeds.

That sentiment can be seen in the crush margins, which have lost about $20 per tonne over the past month.

“Over time, if it stays this expensive, we’ll erode demand on the export side,” said Ball.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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