ICE weekly outlook: Canola set to chop around bottom end of long-term range

ICE's ticker symbol on display at the ICE-owned New York Stock Exchange in March 2016. (Photo: Reuters/Brendan McDermid)

CNS Canada — Contracts on the ICE Futures canola market are bracing for turbulence in coming days as trade negotiations between Canada and the U.S. and a looming production report from Statistics Canada take centre stage.

According to one analyst, these and other factors may play havoc with the Canadian dollar, which could send canola for a ride.

“There’s shifting Canadian dollar trends tied to free trade talks in the U.S,” said Mike Jubinville of ProFarmer Canada, which is owned by Glacier FarmMedia.

Harvest is slowly gearing up across the Canadian Prairies, which is expected to pressure prices in the coming days.

While no one is entirely sure what yields will look like, Statistics Canada is due to release its estimates on Friday morning. Trade guesses peg production somewhere between 18.1 million and 21.3 million tonnes.

Recent weather conditions across much of the U.S. Midwest have also been ideal for finishing off this year’s soybean crop. There are ideas this year’s harvest could turn out to be record large.

“For the near-term, the upside is probably limited by this idea of record large soybean crop,” said Jubinville.

Jubinville also thought soybean selling could ramp up due to the U.S. government’s aid package for soybean farmers. Under the terms of the deal, producers are eligible to receive US$1.65 a bushel on the first 50 per cent of production for 2018.

“I am worried it may prompt increased selling of soybeans because you have to get your production formalized, which is probably through a cash sale, to claim the subsidy,” he explained.

On the other side of the coin, Jubinville noted canola had recently fallen in price, likely correcting off some of the highs recorded in August.

That prompted some ideas the market was technically oversold and had limited downside.

“The path of least resistance on oilseeds is lower,” he said. “But we do have significant support levels underneath us.”

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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