ICE weekly outlook: Canola prices ‘cheap’ but rangebound

Trade also watching U.S. soy complex

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Published: August 10, 2023

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ICE November 2023 canola with Bollinger bands (20,2). (Barchart)

MarketsFarm — ICE Futures canola contracts held relatively rangebound during the week ended Wednesday, in choppy activity as traders wait to get a clearer picture on the size of this year’s crop.

“Overall, canola is relatively cheap,” said Ken Ball of PI Financial in Winnipeg. He pointed to wide crush margins — over $200 per tonne above the November contract — as a sign that canola prices likely needed to move higher.

While the Canadian crop is generally in decent shape, Ball expected actual production would be in the 17 million- to 18 million-tonne range, rather than the 18.8 million tonnes currently forecast by Agriculture and Agri-Food Canada. An official Statistics Canada estimate will be released at the end of August.

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Meanwhile, Australia’s canola crop is also unlikely to reach the record levels hit last year, leaving tighter exportable supplies from the two countries overall.

“We’ll have a bit of a rationing job to do in canola,” Ball said, adding “we’ll have to discourage demand somewhere down the line.”

Current futures prices were too low to seriously ration demand, he said. While that will happen eventually, whether it happens in a week or six months remains to be seen.

Activity in the U.S. soy complex could also provide some direction for canola, with spreading against soyoil a feature in the market, according to Ball. The U.S. Department of Agriculture releases updated supply/demand estimates on Friday, with traders watching closely for any surprises in the data.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

About the author

Phil Franz-Warkentin

Phil Franz-Warkentin

Editor - Daily News

Phil Franz-Warkentin grew up on an acreage in southern Manitoba and has reported on agriculture for over 20 years. Based in Winnipeg, his writing has appeared in publications across Canada and internationally. Phil is a trusted voice on the Prairie radio waves providing daily futures market updates. In his spare time, Phil enjoys playing music and making art.

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