ICE weekly outlook: Canola still stuck in neutral

CNS Canada — The ICE Futures Canada canola market held rangebound during the week ended Wednesday, hitting some of its best levels of the past month before retreating to hold within a well-established trading range.

“We’ve been in a $50 range in canola going back quite a few years,” said David Derwin, commodities investment advisor with PI Financial in Winnipeg.

Current values in the $530 per tonne area for the July contract were near the higher end of that trading range, which should be generating some decent hedging opportunities, he said.

While there’s little to indicate prices are poised to break out of that long-term range, nearby direction will likely stem from weather during the growing season and activity in the Chicago soybean market — although “canola has been much less volatile than soybeans,” Derwin said.

“An extra push with some weather concerns is not out of the question, but a few things would have to fall into place,” he said, noting dryness in parts of the Prairies was being followed closely.

While a rally is always possible, losses are another possibility if rain materializes and crop projections improve. Derwin said there were currently good opportunities in the options market to buy downside protection at cheap levels.

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