ICE weekly outlook: Canola posts gains as loonie plunges

CNS Canada — ICE Futures Canada canola contracts advanced during the week ended Wednesday, on the back of currency action that made the commodity more desirable to international buyers.

“This Canadian dollar has really helped out exports to China, Japan, Pakistan and Mexico,” said Wayne Palmer of Agri-Trend Marketing in Winnipeg.

The loonie continued to follow the losses in crude oil, hitting just above the US68-cent level by Wednesday’s close.

At one point last fall the loonie was worth over US76 cents, and that downward action has affected canola prices significantly, Palmer said.

“You multiply that by the price of March canola and that’s C$37. So if we were trading at a 76-cent dollar and you take C$37, we’d be close to C$450 instead of C$485.”

Canola volumes could have been higher at the end of Wednesday’s session, he said, leading him to conclude some farmers were hanging onto supplies.

“The volumes here are telling me the producer is waiting for $11.25 or $11.50 a bushel on old crop and new crop. He’s not a big seller here; that’s why the futures are as strong as they are.”

The slowing state of the Chinese economy cast a chill over some investors, reflected in a sharp drop throughout North American markets Wednesday.

However, as the Canadian dollar continues its slow march downward, Palmer feels canola prices will continue to rise.

“I think March canola is going to hit close to $525 (per tonne) and be up 30 to 40 dollars a tonne, eventually going into planting (season),” he said.

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Dave has a deep background in the radio industry and is a graduate of the University of Winnipeg. He lives in Winnipeg with his wife and two beautiful children. His hobbies include reading, podcasting and following the Atlanta Braves.

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