MarketsFarm — The ICE Futures canola market held rangebound during the week ended Nov. 16, with the widening premium of the nearby January contract over the March futures seen as a sign of good nearby demand.
ICE January canola settled Wednesday at $882.40 per tonne, a $10.50 per tonne premium over the March contract. That compares with the previous week when the premium was only at $3 per tonne and two weeks ago when the futures were in a more typical carry pattern.
After seeing good cash bids of $20 per bushel across most of Western Canada, farmer selling has since subsided, independent trader and analyst Jerry Klassen said, accounting for some of the strength in the front month.
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Klassen expected farmers would remain on the sidelines until closer to the New Year, with deliveries typically picking back up in January.
Meanwhile, crush margins remain wide and end users are still looking to add to their supplies.
“The market needs to encourage farmer selling and strong farmer deliveries,” Klassen said. He expected demand would keep the spread and the market well supported in the near term.
“Commercial demand usually tapers off through the holiday season, and then we usually see a surge of farmer selling in January,” he said, noting that combination should eventually cause the January-March spread to collapse.
Beyond canola-specific seasonal price trends, ongoing uncertainty over exports out of Ukraine was also keeping a risk premium in the front month, especially as Ukraine is a large exporter of sunflower oil, according to Klassen.
South American weather conditions will become more of an influence over the next few months, as the state of the soybean crops in Brazil and Argentina will influence the world vegetable oil markets.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
