Glacier FarmMedia COVID-19 & the Farm

ICE weekly outlook: Little to sustain canola bids in bear market

may canola
ICE May 2019 canola with Bollinger (20,2) bands, a gauge of market volatility. (Barchart)

MarketsFarm — Although there will be some bounces in ICE canola futures, there is very little currently to sustain any increases in bids, according to Errol Anderson of ProMarket Communications.

While the market has stabilized for the time being, it’s technically oversold, Anderson said.

The market can rebound $5-$10 per tonne, he said, but it’s also very much in need of fresh demand news to sustain it.

“Without it, it’s just a bounce in a bear market.”

As trade talks between the U.S. and China have bogged down, Anderson is concerned a deal may not be reached any time soon or not at all.

With a lack of any positive news from the talks, the markets have become very wary. To jump-start negotiations, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin will travel to China next week. Afterward, Chinese Vice-Premier Liu He will come to the U.S. for further negotiations.

The current state of trade talks has had its effect on the soybeans at the Chicago Board of Trade. Anderson said soybeans have been slipping and are in danger of falling further, perhaps to US$8.75 per bushel for the May contract.

“That will place a drag on us,” he said of canola prices.

To help protect participants, he said buying put options, such as $490-$500 per tonne for November canola, can guard against sharp losses.

“It’s worthy to put in your back pocket, if we get a normal crop and battling this trade deal six months from now. These puts will be excellent protection,” Anderson said, noting that’s based on an assumption for normal weather in 2019.

— Glen Hallick writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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