ICE weekly outlook: Sideways canola seeks spark

CNS Canada — ICE Futures Canada canola contracts remain stuck within a sideways trading range awaiting a spark that would push values one way or the other.

“We could have had this conversation two months ago… canola is refusing to budge from a range,” analyst Mike Jubinville of ProFarmer Canada said of the lack of activity in the market.

“We have a good balance between the competing forces of supply and demand that are holding prices within this range,” he said, noting there was nothing really to indicate values need to break one way or the other.

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Weather concerns in Argentina have supported Chicago Board of Trade (CBOT) soybeans recently, with some of that strength spilling into canola. However, Jubinville said the issues in Argentina were especially supportive for soymeal.

While meal is important for soybeans, canola derives more of its price from the oil side of the equation.

If more soybeans need to be crushed to make more meal, because Argentina’s not producing enough, then there will be excess oil, which would weigh on vegetable oil markets and canola, said Jubinville.

That said, he added, “demand for canola is still good,” and while exports may be slowing down, they are still ahead of last year.

Overall, he didn’t think there was much downside risk in canola, with the market in the process of carving out a bottom. He pegged support in the nearby March contract at about $485-$490 per tonne.

While futures are holding steady, sporadic basis opportunities occasionally present themselves in the countryside.

Looking ahead, Statistics Canada releases a report Monday (Feb. 5) on grain and oilseed stocks as of Dec. 31.

While the middle-of-the-crop-year stocks report is not that closely followed, it could provide some nearby direction if there are any surprises.

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

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