“The seasonal peaks are already in,” said senior analyst Mike Jubinville of MarketsFarm, adding “we’ve tested the upside, and we may test the downside unless we run into some crop adversity in the weeks to come.”

The November contract hit a session high of C$696.70 per tonne on May 29, but was more C$50 off that high a few days later settling at C$642.00 on June 5. Jubinville expected a retest of the highs was unlikely in the short term without any outside influence, with values instead flirting with major downside support.

“I can’t see any reason why we would rally,” said Jubinville, adding that “C$640 (per tonne) on the November is an important area to hold.”

However, while canola may trade within a wide range through the growing season, Jubinville noted that Canadian canola was looking more attractively priced for global buyers with China thought to already be in the market making new crop purchases.

The post ICE canola weekly outlook: Peaks likely in for the season appeared first on Farmtario.

“The market is sensing the Bank of Canada is going to cut rates [on June 5]. So that could be a pressure point on the Canadian dollar. I wouldn’t be surprised if the loonie slides below 72.5 U.S. cents towards 72 cents. That would be support of canola,” Anderson explained.

He added that the current increases in canola on the Intercontinental Exchange have been tied to Malaysian palm oil, which is in short supply.

As well, other reports stated that reduced rapeseed output in the European Union and Russia due to unfavourable growing conditions, including frost, has lent a boost to canola.

Anderson commented there may soon be a need for the BoC to lower its key rates – but in a manner that won’t help canola.

“I’m starting to hear cracking sounds around the stock market. Whether this develops is unknown,” he said, noting the equities recently hit record highs. “There are signs in the treasury market that indicate a pullback may be coming.”

Should the equities falter, Anderson said that would weaken the commodities market. That could lead West Texas Intermediate crude oil to falling below US$70 per barrel, which would put pressure on Chicago soyoil and ICE canola.

While the BoC, the European Central Bank and numerous central banks in other countries have or are leaning towards rate cuts, Anderson said the major outlier is the U.S. Federal Reserve. He pointed out the Fed’s message has been rather mixed by alluding to cuts, holding rates steady, or increasing them.

“We’re one stock market crack away from rate cuts. They’ll have to make a move,” he commented about the Fed.

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The July canola contract peaked at C$672.20 per tonne on May 22 before ending the day C$665.60. However, the contract still gained C$16.30/tonne for the week. Meanwhile, the November contract rose as high as C$693.50 before closing at C$687.80 for a weekly gain of C$18.50.

David Derwin of PI Financial in Winnipeg identified multiple factors contributing to canola’s recent rise, including funds covering their net short positions and seasonal strength.

“Canola had been going down for six to nine months coming (down) from last summer’s highs. Some of that just making back that ground and it could still be that situation,” he said, adding that spillover from the Chicago soy complex and weather issues in South America were also bringing support.

“Soybeans have come up a good US$1 per bushel from their lows. That is causing some buying in canola as well,” he said. “We could still have strength going on for the next month or so.”

While canola appeared to be following the lead of Chicago soyoil in the short-term, Derwin believes that canola is actually taking cues from soymeal price movement.

Recent rains on the Prairies have created a situation where moisture can pressure canola prices, but delayed planting can also support them. It’s anyone’s guess how this summer will shape up, according to Derwin.

“You talk to so many people across the Prairies and (everyone’s opinion) is so different that there’s not necessarily an underlying factor,” he said. “But people have got their canola in the ground and yet it’s cool, so there’s been concern over frost because of how cool it’s getting at night … The weather plays a factor, for sure.”

New crop canola reaching the C$700/tonne mark is not out of the question, Derwin said, believing it can go even higher.

“Even a stretch where it can get to C$720 or C$725 would be equal to C$16 per bushel. There’s a little bit of room yet,” he added.

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“Canola has been showing good independent strength,” said Ken Ball of PI Financial in Winnipeg on the recent runup in the market. He said commercial end users increasing their coverage and speculators covering short positions on expectations for weather issues accounted for some of the buying interest that took values to their nearby highs.

However, widespread rains across the Prairies saw the market take back some of that weather premium. Farmer selling also picked up on the recent strength.

“The uptrend in canola is still intact,” said Ball, although he added that the potential for a large carryout and likelihood of a good crop in 2024 could lead to problems with burdensome supplies.

Statistics Canada reported Tuesday that canola supplies in the country as of March 31, 2024, came in at 8.3 million tonnes, which was up by about 1.3 million tonnes from the same point the previous year. Agriculture and Agri-Food Canada is currently forecasting ending stocks for 2023/24 of 2.0 million tonnes, but the current slow export pace could see that number increase.

From a chart standpoint, November canola is facing an upside target of C$700 per tonne, according to Ball. While the favourable weather conditions may limit the upside potential, activity in outside markets, such as soyoil, could provide support. European rapeseed has also stayed strong recent, due to cold and wet conditions for the crops there.

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

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Canola futures on the Intercontinental Exchange took a hard hit on Apr. 30 that exacerbated its negative outlook, although the oilseed reclaimed about half its losses to start off May.

“This is three steps back and a half step forward,” quipped Tryhuk.

“Canola is trying to find value, trying to find the next set of inputs that’s going to dictate the next move one way or the other,” he added.

As more farmers across the Canadian Prairies begin their spring planting, Tryhuk noted any crop development early on could be supportive.

“But after that, I don’t know,” he said, adding the canola export picture doesn’t look very good among Canada’s top three foreign customers.

“China is a quiet buyer this year. Japan is well off what they would normally buy and so is Mexico,” Tryhuk stated.

The most recent by country export data from the Canadian Grain Commission placed canola exports to China at 2.21 million tonnes for 2023/24, down from the 2.94 million a year ago. Japan’s purchases reached 552,000 tonnes, compared to 690,000 this time last year, and Mexico’s intake is far off at 279,900 tonnes versus 801,000.

To date, the CGC said year-to-date canola exports were nearly 4.55 million tonnes. With the marketing year set to end Jul. 31, there’s little chance of them reaching the seven million tonnes projected by Agriculture and Agri-Food Canada in its April supply and demand report.

“The carryouts are going to be big this year. That’s going to make it difficult for this market to penetrate that series of highs we had around that $660 [per tonne] level,” Tryhuk continued.

In that April S/D report, AAFC projected canola ending stocks for 2023/24 at two million tonnes, up from the previous year’s 1.51 million.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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As of April 2, 2024, the net managed money short position in canola futures came in at 89,739 contracts (8,146 long/97,885 short), which was down by roughly 6,000 contracts from the previous week.

Open interest in the canola market was down by 5,442 contracts on the week at 288,530 contracts.

At the Chicago Board of Trade, the net short position in soybeans was up by about 4,000 contracts to come in at around 127,000 contracts. Soyoil futures saw the recently established net long grow to just over 7,000 contracts from only 131 contracts the previous week.

The net short position in corn held relatively steady, increasing by about 4,500 contracts on the week to come in at roughly 250,000 contracts.

In wheat, the Chicago soft wheat market reported a net short position of about 91,000 contracts, which was steady with the previous week. The net short in Kansas City hard red winter wheat came in at roughly 40,800 contracts. In Minneapolis spring wheat, managed money traders were holding a net short of around 28,600 contracts.

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

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After the May contract on the Intercontinental Exchange (ICE) fell to its lowest level in two-and-a-half weeks, at C$615.70 per tonne on March 28, it jumped to rise above C$645 on April 2. However, the contract closed C$10 below their daily highs on both April 2 and 3.

Wayne Palmer of Exceed Grain in Winnipeg said that a lack of selling in the spring will cause the funds to cover their shorts in the market, in turn fueling prices.

“(Since) the middle of February, we went up over C$75/tonne. I think farmers, the shrewd farmers, sold on the way up. They’re cash-adequate until they successfully see their canola emerging,” Palmer explained. “No one else is going to sell right now.”

He also attributed soyoil’s recent rise for the higher canola prices. The July contract briefly surpassed the 50 U.S. cent per pound mark before settling lower on April 2. Soybeans have also been testing resistance levels at US$12 per bushel. Rising Malaysian palm oil and firmer crude oil prices due to supply cuts from OPEC+ have also supported canola during the week.

“Demand is still compromised. But right now, it doesn’t really matter because the funds are short. The funds are dictated, according to the charts, that they have to buy again. That’s what we’re seeing every day in canola,” Palmer added.

Despite dry conditions in many canola-growing areas on the Prairies, Palmer said weather was taken out of consideration by the trade over the past week. But eventually, it will force the hands of traders and the funds.

“We’re in that crazy season right now where we’re a month away from possibly seeing that we are moisture-deficient. If that happens, we’re going to have a double-whammy because you’re going to have the commercials buying this market, the crushers buying the market and you’re going to have the funds panic-buying in the short position,” Palmer said. “The risk-reward is definitely on the upside.”

Because of a lack of selling, he believes canola prices can rise even higher.

“The only way that the canola market can drop is if the other oilseeds drop as well,” Palmer said. “This is going to be an interesting rains. Are we going to have the timely rains? … If we get that good growing weather, I believe that this market will be overbought, but you can’t sell it (right now) because the funds are short.”

—Adam Peleshaty reports for MarketsFarm from Stonewall, Man. 

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As of March 19, 2024, the net managed money short position in canola futures came in at 124,887 contracts (6,491 long/131,378 short), which was down by roughly 11,000 contracts from the previous week and the smallest short position in two months.

Open interest in the canola market was up 5,410 contracts on the week at 300,421 contracts.

At the Chicago Board of Trade, the net short position in soybeans decreased by about 8,000 contracts to come in at around 138,600 contracts.

The net short position in corn also lost about 8,000 contracts on the week to come in at roughly 244,200 contracts.

In wheat, the Chicago soft wheat market reported a net short position of about 81,200 contracts. The net short in Kansas City hard red winter wheat came in at roughly 37,300 contracts. In Minneapolis spring wheat, managed money traders were holding a net short of around 22,800 contracts.

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

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“The general trend is still pointing downward, but we’ve been hovering around this C$600 level for a month now,” said commodities investment advisor David Derwin of PI Financial in Winnipeg.

“It’s getting closer, but perhaps not quite yet,” said Derwin on whether the lows were in yet, adding that if values managed to stabilize around the C$600 per tonne level for another month he would be more confident that the downtrend was broken.

The May contract traded just above the C$600 per tonne mark on March 6, but settled slightly below that level at C$598.90 per tonne.

While increased farmer selling on any moves higher would keep a lid on the upside, Derwin noted that many producers were already well sold on their canola. Supportive seasonal price trends, such as weather news during the spring planting season, also often underpin values at this time of year.

Statistics Canada releases its first planting expectations for the upcoming growing season on March 11, with average pre-report expectations calling for a slight decline in seeded canola area from the 22.1 million acres planted in 2023. However, opinions are divided, and some analysts expect canola area could still be up on the year.

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“We need to go lower to get some export business accomplished,” said Jamie Wilton of RJ O’Brien in Winnipeg on the likelihood of additional losses in canola.

Canada has exported 3.0 million tonnes of canola through 27 weeks of the 2023/24 marketing year, well short of the 4.5 million tonnes exported by the same time the previous year, according to Canadian Grain Commission data.

Wilton added that farmers are still holding large amounts of unpriced canola, making them heavily long the market and looking to sell whenever the futures try to move higher.

Total producer deliveries of canola into the commercial pipeline as of week 27 of the marketing year of 8.6 million tonnes were 16 per cent behind the previous year’s pace.

On the other side, speculative fund traders are heavily short the market, and content to watch their profits grow as prices trend lower, according to Wilton.

With newly harvested South American soybean crops starting to weigh on the Chicago soy market, Wilton expected it would take an outside catalyst, such as a weather issues somewhere in the world, to break canola out of its downtrend.

“We need a weather scare, and I don’t think there’s anything substantial enough out there,” added MarketsFarm analyst Bruce Burnett.

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

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