MarketsFarm — ICE canola futures are in trouble for a number of reasons, according to Exceed Grain senior marketing analyst Wayne Palmer.
“We’re in a lot of trouble unless Trump signs this deal with China,” he said.
Reports have stated the U.S. and China will sign a trade agreement at the end of March. U.S. Trade Representative Robert Lighthizer has commented U.S. agriculture will be one of the big winners in the deal.
The spillover from that will help the canola market, said Palmer.
As for Canada, its relations with China soured when Huawei executive Meng Wanzhou was arrested in Vancouver in December.
Meng is now facing extradition to the U.S. on charges of fraud. Since December, China has detained two Canadians, who have been accused of espionage by Chinese authorities.
More recently, China has barred Richardson International from selling canola to the country, which has been a blow to the canola market.
Canada has been China’s largest source of canola and a record amount was to have been exported, but sales to the Asian country began to dry up in January.
Palmer stressed Canada needs China more than China needs Canada.
If there isn’t a resolution to this, “the canola market will continue to slide,” he said.
Added to the problem is Canada’s large carryover of the 2018 canola crop, which has been hampered by lacklustre demand, especially from China, Palmer noted.
“What are we going to do with the 2018 crop when we’re going to have a 2019 crop to market here in six months?” he questioned.
Already there have been reports of Canadian farmers considering seeding fewer canola acres in the spring.
— Glen Hallick writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.