MarketsFarm — Although canola prices closed lower on Wednesday, the Canadian oilseed is seen as still likely to grind higher in the coming weeks.
“The charts and the patterns that have developed, and are still in place for canola, have been kind of the same for the past few months. The longer-term trends are still pointing higher for canola,” analyst David Derwin of PI Financial in Winnipeg said, adding that Chicago soybeans are pointing upward as well.
As canola made strong gains due to Russia’s invasion of Ukraine, a shift crept into the market last week. Those increases became smaller, with decreases appearing in old-crop or new-crop, depending on the day.
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By the start of this week, the rolling-out of the nearby May contract was beginning to take hold. Come the end of trading on Wednesday, canola was down pretty much across the board, except for some lightly-traded far-off new-crop contracts.
Derwin acknowledged steep declines in U.S. wheat had some effect on canola. Those May wheat contracts plummeted by their daily limit because of the increased possibility of a cease-fire in the Russia-Ukraine war.
That put great pressure on corn and the Chicago soy complex, which by extension, meant canola as well.
The analyst pointed out that over the last six months canola has made incredible gains. A setback such as Wednesday’s very likely wouldn’t have much long-term impact.
“Some days are down days,” he said.
Derwin urged farmers to take advantage of the high prices for canola, using a balance of call and put strategies, especially with old-crop canola going for $25 per bushel and $21 for new crop.
Also, he said, they should factor in their potential yields, moisture levels and production expectations for 2022.
— Glen Hallick reports for MarketsFarm from Winnipeg.
