ICE weekly outlook: Which way will canola go?

MarketsFarm — As September winds down, ICE Futures canola is poised to either climb higher or fall back, according to analyst Errol Anderson, president of ProMarket Communications in Calgary.

That movement will largely be determined by the direction taken by November soybeans on the Chicago Board of Trade, which currently has support at US$13 per bushel.

“If the beans can fight off US$13 and get back up to US$13.50, then there is a case for the canola market moving up too,” Anderson commented, noting the Canadian oilseed’s November contract could then reach $760-$770/tonne.

“But if the soybeans do break US$13, then suddenly the trading range is down to US$12.50 to US$13. If that happens, then canola will do go down into that $700-$725 range.”

That said, Anderson pointed to canola’s basis levels, which have recently improved.

“The basis levels are narrowing up, which is a reflection of the growers’ standing tighter,” he said.

That lack of farmer selling together with the sense of ICE canola futures being oversold have combined to stem the oilseed’s sharp losses, which generated some small gains on Wednesday.

Anderson also pointed to grain markets as whole, which have been falling back. The downtrend will eventually turn around, he said, predicated on the markets’ reaction to the interest rate announcement from the U.S. Federal Reserve.

Following the Fed’s policy meeting Wednesday, chair Jerome Powell said the central bank decided to freeze its benchmark rate at about 5.4 per cent. However, he said further rate increases could be in the works.

— Glen Hallick reports for MarketsFarm from Winnipeg.