Glacier FarmMedia COVID-19 & the Farm

ICE weekly outlook: Canola grinding lower

march canola
ICE March 2019 canola futures with Bollinger (20,2) bands. (Barchart)

ICE Futures canola contracts held relatively steady during the week ended Wednesday, with a softer tone in old-crop contracts and strength in new-crop months.

The general trend is likely pointed lower in the near future, with any developments in trade talks between the U.S. and China likely to provide some direction.

“The market is awaiting a potential agreement before March 1,” said Errol Anderson of ProMarket Communications in Calgary. The U.S. is set to impose increased tariffs on Chinese goods if a deal between the two countries isn’t reached by then.

While negotiations are underway, burdensome supplies of both soybeans and canola will likely continue to weigh on oilseed prices.

“You can’t keep markets up on hearsay, and we’re still in the hearsay stage,” Anderson said of the trade talks.

“We’re going down, there’s no nice way of saying it,” he said, adding “the U.S. will have an enormous carryout and I can see the beans having an ‘eight’ in front of them on the futures… It’s just a grind.”

The front-month March soybean contract settled Wednesday at US$9.165 per bushel.

Canola supplies are also large, and with the March canola contract testing the $480 per tonne level, Anderson placed the next support at $475. After that, the weekly charts point to a downside target of $465 per tonne, he said.

Demand will be needed to get out of the rut, but Anderson wasn’t certain if there would be enough.

However, while futures may be trending lower, “the strength will be in the basis levels,” he said.

He expected farmers would hold onto their crops and be unwilling sellers, which means grain companies will need to offer better prices on the cash side.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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