MarketsFarm — ICE Futures canola contracts started the new year on a firm footing, with little sign that the ongoing strength will end anytime soon.
“Is canola expensive? Yes, but everything is expensive,” said analyst Mike Jubinville of MarketsFarm. While canola may look overpriced by some metrics, he noted the high prices were necessary to ration demand as canola trades relative to other markets.
“The crusher needs everything,” he said, adding he expected domestic processors would continue to keep canola well supported in order to secure supplies and thwart export movement.
Read Also
U.S. grains: Wheat futures rise on supply snags in top-exporter Russia
U.S. wheat futures closed higher on Thursday on concerns over the limited availability of supplies for export in Russia, analysts said.
Also, while traditional crush margin calculations based off of soyoil and meal values indicate canola crushers should be losing money at current prices, the real crush margin is actually much stronger with canola oil trading at record premiums over soyoil, according to Jubinville.
“I think canola has disconnected from soybeans,” he said.
European rapeseed and Malaysian palm oil are both trading at highs of their own, while energy markets have also shown some strength.
The charts also look supportive for canola, with March holding well above its major moving averages and no overbought signals from a technical standpoint, according to Jubinville.
“We’ll have corrections and they could be sharp ones… but it doesn’t mean this is over,” he said, adding “the trend is still up.”
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
