Weather concerns support canola

(Resource News International) — Canola contracts traded on the ICE Futures Canada platform are starting to trend higher in the charts, despite a correction on Tuesday, with concerns about the dry weather conditions in Alberta and Saskatchewan behind some of the general strength.

Jerry Klassen, manager with GAP Grains in Winnipeg, said the uncertainty about the new crop year, together with tightening nearby supplies, could keep prices supported going forward.

“The market is starting to focus on the dryness concerns in Western Canada,” said Klassen. “The farmers are starting to conserve stocks, because they see the adverse conditions heading into spring.”

Klassen said farmers are getting more bullish on the market, and are holding onto their old-crop supplies as a result.

“The lack of selling from the farmer will give the market some breathing room to incorporate a risk premium due to the uncertainty of production,” said Klassen adding that “the market will be very sensitive to growing conditions in North America over the next 30 to 60 days.”

In addition to the lack of selling pressure and the new crop uncertainty, canola also remains well supported by a strong domestic crush pace and steady export movement, Klassen said.

Supply/demand tables for canola were starting to look a little tighter than the trade was initially forecasting, which should keep old-crop futures prices supported, he said.

Expectations for a tight U.S. soybean carryout should also be supportive for canola, according to Klassen. South American harvest pressure would also be easing off soon, which would be another supportive price influence, he added.

Aside from the direct supply/demand fundamentals for canola, outside market forces, such as crude oil prices, could also provide some direction for the market going forward, he said.

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