ICE weekly outlook: Canola looks to rise with commercial interest

ice futures canada
(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts finished mixed during the week ended Wednesday as intermonth trading took hold with traders exiting the May contract in favour of the more deferred values.

The May contract gained $5.70, while some of the outside contracts lost a few days.

Ideas that supplies of canola are tightening across Western Canada lifted the May contract for much of the period.

“It’s getting pretty tight on the pace of usage,” said Mike Jubinville of ProFarmer Canada in Winnipeg. “We don’t have the abundance of stocks like soybeans.”

Still, he doesn’t think the market will run out of supplies to sell before the new crop is ready to deliver.

“Can we move up from where we are? Absolutely,” he said, noting the May canola contract temporarily dipped as low as $473 as recently as April 3.

Cash basis levels on the Prairies have seen improvement, he said, with a positive basis being recorded in Manitoba recently, zero in Alberta and single digits in Saskatchewan.

“The May and July contracts are about even, which tells me the commercials are looking for a reload of supply,” he said.

Another analyst said he’s not sure how many more acres traditional canola growers will want to take on, despite the chance for a good return.

“A lot of growers tell me they’re leery of pushing acres a lot more; they’d like to try but there’s a lot of issues about over-rotating canola,” said Ken Ball of PI Financial in Winnipeg.

Soy markets are showing a lot of resistance to any further downward moves, he added, which could help canola kick higher in the near-term.

A recent drive in a large stretch of Saskatchewan reaffirmed Jubinville’s belief there is still a significant amount of canola out there that needs to be harvested before planting begins.

“I was driving from Saskatoon to Melfort last week; I saw a lot of crop in the field.”

Jubinville is also watching decreasing crush margins in China.

“I think they will be a reliable canola buyer certainly but if crush margins are dropping to negative territory it does raise questions over demand issues,” he said.

In the near term, though, he said he expects supplies will continue to flow.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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