ICE weekly outlook: Canola facing uncertainty

CNS Canada — ICE Futures Canada canola contracts fell to their lowest levels in more than three months during the week ended Wednesday, but could still have more room to the downside given the general sense of global trade uncertainty.

“Every commodity trader in North America or globally is scared to death right now,” said Errol Anderson, of Pro Market Communications in Calgary.

If the U.S. goes through with imposing tariffs on China, as early as Friday, “that’s very bad news,” as China would retaliate with its own tariffs, he added.

With soybeans already moving lower, Anderson expected increased trade tensions would see beans drop below US$9.25 per bushel, with November canola possibly breaking below C$500 per tonne.

A move by the U.S. Federal Reserve to raise interest rates on Wednesday could weigh on the Canadian dollar, especially as the Bank of Canada is not expected to be raising rates any time soon.

A softer domestic currency could provide support for canola, but “when you get right down to it, soybeans are more important than the Canadian dollar,” said Anderson.

Recent rains across Western Canada had also boosted the yield potential in many areas, he said, limiting the potential for a weather-related rally.

However, soybeans are oversold and a recovery in oilseeds is possible if the trade tensions ease, according to Anderson.

“It’s all about trade, and it’s all about (U.S. President Donald) Trump,” said Anderson. “Trump is a bull in the china shop right now… which is not good news for canola prices either.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.