Glacier FarmMedia – It was a tale of two halves for canola during the week ended April 3.
After the May contract on the Intercontinental Exchange (ICE) fell to its lowest level in two-and-a-half weeks, at C$615.70 per tonne on March 28, it jumped to rise above C$645 on April 2. However, the contract closed C$10 below their daily highs on both April 2 and 3.
Wayne Palmer of Exceed Grain in Winnipeg said that a lack of selling in the spring will cause the funds to cover their shorts in the market, in turn fueling prices.
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“(Since) the middle of February, we went up over C$75/tonne. I think farmers, the shrewd farmers, sold on the way up. They’re cash-adequate until they successfully see their canola emerging,” Palmer explained. “No one else is going to sell right now.”
He also attributed soyoil’s recent rise for the higher canola prices. The July contract briefly surpassed the 50 U.S. cent per pound mark before settling lower on April 2. Soybeans have also been testing resistance levels at US$12 per bushel. Rising Malaysian palm oil and firmer crude oil prices due to supply cuts from OPEC+ have also supported canola during the week.
“Demand is still compromised. But right now, it doesn’t really matter because the funds are short. The funds are dictated, according to the charts, that they have to buy again. That’s what we’re seeing every day in canola,” Palmer added.
Despite dry conditions in many canola-growing areas on the Prairies, Palmer said weather was taken out of consideration by the trade over the past week. But eventually, it will force the hands of traders and the funds.
“We’re in that crazy season right now where we’re a month away from possibly seeing that we are moisture-deficient. If that happens, we’re going to have a double-whammy because you’re going to have the commercials buying this market, the crushers buying the market and you’re going to have the funds panic-buying in the short position,” Palmer said. “The risk-reward is definitely on the upside.”
Because of a lack of selling, he believes canola prices can rise even higher.
“The only way that the canola market can drop is if the other oilseeds drop as well,” Palmer said. “This is going to be an interesting rains. Are we going to have the timely rains? … If we get that good growing weather, I believe that this market will be overbought, but you can’t sell it (right now) because the funds are short.”
—Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
