CNS Canada –– ICE Futures Canada canola contracts moved higher during the week ended Wednesday, with the biggest gains in the new-crop months as concerns over planting delays in parts of Western Canada provided some support and the spreads narrowed in.
However, canola may be running into resistance to the upside, according to market participants.
A lack of farmer selling accounted for some of the recent strength in canola, as producers remain focused on spring seeding for the time being.
“We first need to get the crop in the ground, which causes some jitters,” said Keith Ferley of RBC Dominion Securities in Winnipeg.
“The general consensus has been ‘Too cold and too wet,'” added Reid Fenton of BLB Grain Group at Three Hills, Alta., on the planting weather to date.
However, he added, seeding will likely wrap up in Alberta within the next week, while the moisture will help yields in the long run.
Fenton said there was room for improvement in the cash market, especially for new-crop canola.
However, he said the futures may have a hard time moving above the psychological C$500 per tonne level given the expectations for large U.S. and South American soybean crops. Both the old-crop July and new-crop November canola contracts finished the week just below that chart point.
As a result, Fenton said, farmers should know their production costs and cash flow needs while pricing canola, with put options around the $500 level one pricing strategy to consider.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.