CNS Canada — ICE Futures Canada canola contracts seem to have found a new range during the week ended Wednesday, with both the July and November contracts lifting around the $500 per tonne mark.
Weakness in the Canadian currency and a dry weather premium in Western Canada were behind a lot of the support. As well, a lack of farmer selling helped buoy the market as many producers hung on in search of better prices.
“Anytime we drop below $10 a bushel, the selling interest from the farmer dies out; anytime we get above $11 a bushel, the commercial interest stars to slow down and we operate in a range,” said Mike Jubinville of ProFarmer Canada in Winnipeg.
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Malaysian palm oil helped to underpin the vegetable oil market, with futures Wednesday marking their biggest jump in five months. This helped alleviate some talk that canola wasn’t a bargain any more and had become too expensive.
Seeding of some crops has begun across the Canadian Prairies, but the vast majority of canola still has to go in the ground.
While too much dry weather is a bad thing, Jubinville said, it usually ends up being OK.
“There’s an old adage: Seed into dust your bins will bust,” he said, adding the market was still in a two- or three-year cycle that wouldn’t change dramatically without a fundamental catalyst.
Still, he said, while canola was parked above the C$500 mark, it wasn’t guaranteed to last.
“If the crop gets in the ground in good shape and we get a good rain out west, we’ll see this thing turn down pretty fast and pretty hard,” he said.
If the volume starts to fall off in the coming days, he added, it could also suggest buying action is starting to lose its momentum.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
