ICE weekly outlook: Weather still key for canola

CNS Canada –– The ICE Futures Canada canola market moved lower during the week ended Wednesday, as speculators took profits on a recent rally that saw values hit fresh contract highs.

Spillover pressure from the declines in Chicago soybean futures was also bearish for values.

There were some reports of improving weather conditions for the western Canadian canola crop, with some nice rains hitting dry regions of Alberta and Saskatchewan, said Ken Ball of PI Financial in Winnipeg.

But traders are still worried about lower production prospects in Canada as unfavourable hot weather is expected to return in mid-July.

“We had some nice showers over the past few weeks in parts of Saskatchewan and Alberta, and it definitely improved some areas,” he said. “But we might start going back the other way a little bit for the next week or 10 days.”

Problems with excess moisture in the U.S. are also putting some U.S. soybean crops at risk, which could keep oilseed prices well supported going forward if things don’t start to dry up in the Midwest.

Choppy activity is likely to become the trend, however, as traders are still unsure about how big the U.S. soybean and Canadian canola crops will end up being this year, Ball said.

“There’s no huge direction to things right now; we’re just going to be choppy, I think, until the traders are able to sort out how the crops are looking a little ways down the road.”

In the longer term, canola is likely to stay firm, as its fundamental situation is still looking to be much tighter than that of the U.S. soybean market.

“Canola is still in a situation where it’s going to have to stay pretty firm to keep rationing usage out,” Ball said.

About 20 per cent of the U.S. soybean crop is wet enough to be in jeopardy, while 70 per cent of Canada’s canola fields are too dry, he added.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.