MarketsFarm — ICE Futures canola contracts climbed sharply higher during the week ended Wednesday, hitting their best levels in more than a month as strength in the Chicago Board of Trade soy complex provided spillover support.
“We have a bit of a short-covering rally going on in canola,” said Jerry Klassen, manager of Canadian operations with Swiss-based GAP S.A. Grains and Products in Winnipeg.
A move above some technical resistance levels contributed to the speculative activity, with a lack of significant farmer selling on the other side also providing support, he said.
“The overall fundamentals for the oilseed complex are a bit uncertain now,” Klassen said, pointing to the slow seeding progress in the U.S. “The market is incorporating a risk premium due to the uncertainty in soybean production.”
While the fundamentals are still relatively bearish for canola, with large old-crop supplies overhanging the market and ongoing concerns over Chinese demand, Klassen said the market was stabilizing and seeing a temporary reprieve with supportive influence from soybeans.
Dryness concerns in parts of Saskatchewan and Alberta, with more hot weather in the forecasts, should also be providing some support for canola.
“In two weeks we’ll need some timely rains, or this crop will see some yield drag,” said Klassen.
— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.