MarketsFarm — ICE Futures canola contracts climbed to their highest levels ever during the week ended Wednesday before running into some profit-taking resistance.
Its general uptrend remains intact for the time being, but a downturn is also inevitable.
The nearby May canola contract hit a session high of $1,177.80 per tonne on Wednesday, before backing away to settle $40 below that level.
“Are we going to $1,200 (per tonne)?” analyst Errol Anderson of ProMarket Communications in Calgary asked, adding “we’re not far away.”
Anderson looked at crude oil as the leader, noting “if crude goes back to the highs we saw three weeks ago, canola could go higher.” However, he added that while there was still bullish momentum in the market, “it’s very unpredictable.”
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Domestic crushers are making money at current price levels, “and as long as they’re making money they’ll be going after canola,” he said.
“Prices will break down when we hear the words ‘demand destruction,’” he added, noting the eventual retreat could be abrupt. A ceasefire in Ukraine would be a possible catalyst for a sharp drop in grain and oilseed markets, but other outside influences could also trigger a downturn.
“All of a sudden the vegoil market will have a bad hair day and down we go, but we don’t know what day that is,” Anderson said.
“We’ll see both sides of the rainbow,” he added, noting it was impossible to say if canola was already at the top of the rainbow or still rising.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
