ICE weekly outlook: Canola seen as teetering, likely to tumble

MarketsFarm — ICE Futures canola values sit high atop a precipice, tittering toward a steep drop.

One recourse for canola is to bank on prices for soyoil and soymeal on the Chicago Board of Trade (CBOT) to rise sharply in the near future — or take that step off its perch to what would be a hard hit.

“Canola is wildly overvalued and wildly overbought,” trader Ken Ball of PI Financial in Winnipeg said, pointing to the Canadian oilseed’s prices running $60-$100 per tonne more than Chicago product values.

“There’s a lot of emotion and tension in the market. The reality is not nearly as exciting as the emotion is,” he said.

While the war in Ukraine certainly added to the values of all edible oils, the vast bulk of the speculative longs loom direly over the canola market.

“Certainly no commercials will be interested in buying it, with the margins as bad as they are. When the specs decide to cash out, [canola] will collapse,” Ball said, noting prices could quickly plummet $100-$150 per tonne.

If soyoil and soymeal were to jump sharply, such would reinforce canola prices, he said, adding “they got a long way to go to do that.”

With old-crop prices pushing lower for the most part, Ball said that indicates the commercials are rolling out their May, and even their July positions. That would only add to the quandary in which the specs currently remain — especially with gains in the new-crop months steadily narrowing the spreads.

— Glen Hallick reports for MarketsFarm from Winnipeg.