ICE weekly outlook: Despite declines, signs point to increases for canola

MarketsFarm — Although old-crop canola was falling back midway through the week of Jan. 10, analyst David Derwin of PI Financial in Winnipeg said the oilseed should “grind higher” in weeks to come.

“The fundamentals haven’t changed at all — they’re not going to get more canola out of the ground until the fall,” he said.

With such tight supplies, price rationing has been necessary for canola to curb export demand — moreso with the 2021 harvest reaping 12.6 million tonnes, some 35 per cent less than what had been anticipated back in the spring. Drought and heat exacted a heavy toll on canola, leaving little to be had.

“The short-, medium- and long-term trends are still pointing higher,” Derwin said, noting more support could come from the soybean quandary in South America.

Like the Canadian Prairies this past summer, most of Argentina and southern Brazil have been experiencing drought and intense heat. Brazil’s hopes of obliterating last year’s soybean harvest of 137 million tonnes have evaporated into thoughts the harvest might be as high as last year. One report said that if sufficient rain doesn’t soon fall over the lower part of Brazil, up to 90 per cent of the soybean crop could be lost.

As for Argentina, dry conditions are reported to have forced grain vessels on the Parana River to reduce their cargoes by 30 per cent due to record low water levels.

“Definitely the South American situation has helped by bringing [Chicago Board of Trade] soybeans up about a dollar per bushel in the last couple of weeks,” Derwin said, noting the spillover underpins canola.

— Glen Hallick reports for MarketsFarm from Winnipeg.