ICE weekly outlook: WASDE spillover boosts canola

Canola may soon become price-sensitive, analyst says

ICE March 2021 canola with 20-, 50- and 100-day moving averages. (Barchart)

MarketsFarm — Sharp increases in soybean, corn and wheat futures on Tuesday, following the release of the latest supply and demand report from the U.S. Department of Agriculture (USDA), in turn spilled over into canola.

The most significant factors in USDA’s world agricultural supply and demand estimates (WASDE) were further reductions to ending stocks for soybeans, corn and wheat.

“That really helped to support canola as well,” David Derwin, analyst with PI Financial in Winnipeg, said.

As ICE Futures’ canola reached new contract highs — with the March contract closing up $14.10 on Tuesday at $686.90 per tonne — Derwin cautioned the oilseed may soon become price-sensitive.

“If you’re looking at hedging or exiting, any cash replacement you might want to use some stocks and keep an eye on prices,” he said.

Derwin also advised farmers to carefully watch local basis levels.

“We are seeing a lot of differences and erratic price movements between cash levels, as well as futures,” he said. “Don’t get too complacent. Start thinking about new crop as well.”

Following the release of the January WASDE, soybeans shot up about 45 U.S. cents per bushel after USDA cut ending stocks from last month by approximately 20 per cent, to 140 million bushels. Compared to 2019-20, the soybean carryover has plummeted over 73 per cent.

At 1.55 billion bushels, the January estimate of the corn carryout was down almost nine per cent from USDA’s December WASDE. In comparison to 2019-20 ending stocks, it has dropped more than 19 per cent.

Those bullish USDA numbers dramatically boosted corn, which rose by its daily limit of 25 U.S. cents per bushel within about 12 minutes after the report was released.

Wheat prices rose between 15-30 cents per bushel following USDA’s three per cent cut to ending stocks, at 836 million bushels. Compared to 2019-20, that’s a drop of about 19 per cent.

With the monthly WASDE out of the way, Derwin said markets will now focus on the weather around the globe.

That includes South America, where Argentina continues to deal with dry conditions. Also the U.S. Plains have been dealing with dryness.

“There’s a lot of growing season weather ahead of us over the next several months,” he said.

Markets will also continue to pay attention to China and its demand for canola, soybeans and other commodities, he said.

— Glen Hallick reports for MarketsFarm from Winnipeg.



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