Intercontinental Exchange (ICE) canola futures went on a rollercoaster ride during the week ended June 12.
The July contract failed to record consecutive gains or losses during the week, with prices ranging from C$615.40 to C$641.80 per tonne. The November contract, which traded as high as C$662.90 earlier in the week, fell to its lowest point since May 1 at C$637.40 on June 12 before closing the day higher.
Ken Ball of Ventum Financial Corp. in Winnipeg identified the reasons for canola’s volatility as speculative funds liquidating long positions as well as increased grower selling.
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“The canola market, being a very small market, it just can’t handle it when the market goes through a shift like that,” he said. “We had that very (volatile) day where we (ranged) C$30 and there have been a few other relatively weak days in canola just as we transition from a spring bull market into a little bit of a different market over the last few weeks.
“It should start settling down now, being a little bit more in line with the soy markets. We’re off to a fairly good start to the canola crop.”
From June 10 to 12, the July soyoil contract had three positive sessions, but did not gain more than 0.12 of a U.S. cent per pound in any of those days. Ball added that while canola crush margins are lower than they were last year, they are still quite strong.
Rains across the Prairies over the last month have alleviated drought and dry conditions, providing sufficient moisture for canola and pressuring prices. Ball believes the rains were the impetus to recent selling action on the market. However, he added the rains have slowed canola development and the crop is in need of a few hot and sunny days in a row to catch up.
“There are hardly any truly dry areas left in the Prairies. But crops are starting to develop slowly due to the cool and cloudy weather,” Ball said. “Of course, it is only the first part of June … At the end of June, early July, we’re going to see some very good crops in the Prairies.”
Ball said the typical spring rally for canola has subsided, but there is still time for weather scares to temporarily prop up canola prices. However, he said canola prices are currently biased to the downside.
“It’s a bit early for the market to just assume we’re going to have a great crop, but we are leaning to a good start to the crop,” Ball explained. “Assuming we have close to a normal summer, (prices are) likely to be leaning lower going into fall.”
