Glacier FarmMedia — Concerns about canola getting too expensive have crept into the Canadian oilseed’s recent rally on the Intercontinental Exchange.
“Canola has defied logic, marking up from $620 to $670 (per tonne),” said Tony Tryhuk, director of futures trading for RBC Dominion Securities in Winnipeg. “The Chinese news was supportive, but we’re choking off their interest.”
Tryhuk said canola made excellent gains after Canada and China reached their deal on tariffs, which will lower China’s tariffs on its imports of Canadian canola seed and oil to 15 per cent effective March 1. But the May canola contract ran into resistance and he said there wasn’t any follow through.
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He stressed that if canola gets too expensive that China might not buy the two million tonnes of canola Agriculture and Agri-Food Canada has projected in its supply and demand estimates. He said that exports to Japan, Mexico and Canada’s other top canola customers won’t make up for any reduced purchases by China.
Tryhuk added the canola carryout already looks “sloppy” and said for real progress to be made China needs to buy more than two million tonnes of canola.
Helping to keep canola prices from getting too high is the lack of support to push the oilseed above its resistance. For the most-traded May contract, Tryhuk placed resistance at C$680/tonne.
“We would need something exceptional to happen,” he said.
Tryhuk there could be some support coming from any further gains in Chicago soyoil, especially if it increases well above 60 cents per pound.
