CNS Canada — Canola futures are trading at roughly the same level they were a month ago, but the commodity is looking much more expensive from an end-user’s perspective, as crush margins have lost about $25 per tonne since the middle of March.
“The Canadian dollar has been going up and bean oil is making contract lows every week,” said Ken Ball of PI Financial in Winnipeg.
The fact that canola prices were still holding firm “is certainly a sign of a very sturdy market,” he said.
Some of the recent strength in canola futures is tied to weather concerns in Western Canada, as persistent winter weather has raised the possibility of late seeding.
Even with the late start “the chatter in the country is that everybody is talking about more canola,” said Ball.
Many industry participants were forecasting record-large canola seedings of 24 million acres or more, he said. That would compare with the roughly 23 million acres seeded in 2017.
In addition, both exports and domestic crush pace are running behind on the year, and expectations are for a large canola carryout for the current 2017-18 crop year.
With large old-crop supplies and acreage projections, “once the market can see seeders in the field then it’s vulnerable to come back down,” said Errol Anderson of ProMarket Communications in Calgary.
“As soon as the market senses that the crop is going in, look out, we’re going to have a bad day,” he said. However, he expected spring weather premiums could remain supportive for at least the next month.
“If there’s still snow on the ground in two weeks, it will be more major,” added Ball.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.