MarketsFarm — The looming harvest may keep a lid on the upside in the ICE Futures canola market over the next month as participants wait to get a better handle on the size of this year’s crop.
“We’re still at the mercy of trying to determine what size of crop we have,” said MarketsFarm Pro analyst Mike Jubinville, noting trade guesses range anywhere from 16.5 million to 19 million tonnes.
He was leaning toward the lower end of that range, at around 17.5 million tonnes, which would be well below Agriculture and Agri-Food Canada’s current estimate of 18.8 million and would leave the country with relatively tight exportable supplies.
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He expected domestic crushers would continue to pay up for canola, given the historically wide crush margins, with most of the necessary demand-rationing coming from the export side of the market.
“We have this element of demand-rationing… which limits the downside, but immediate harvest pressure will create volatile activity over the next few weeks,” Jubinville said.
Gains in outside vegetable oil markets were supportive, he added, limiting the downside risk for canola through the harvest season.
From a chart standpoint, Jubinville said the convergence of the 50- and 200-day moving averages around the $760 per tonne level in the November canola contract was providing support, although that level could be tested during the harvest.
On the other side, November canola settled just below the psychological $800/tonne level on Wednesday.
Beyond the Canadian harvest, the market will also be keeping an eye on U.S. soybean production and then on South American crop potential.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
