MarketsFarm — ICE Futures canola contracts held relatively rangebound during the week ended Wednesday, in choppy activity as traders wait to get a clearer picture on the size of this year’s crop.
“Overall, canola is relatively cheap,” said Ken Ball of PI Financial in Winnipeg. He pointed to wide crush margins — over $200 per tonne above the November contract — as a sign that canola prices likely needed to move higher.
While the Canadian crop is generally in decent shape, Ball expected actual production would be in the 17 million- to 18 million-tonne range, rather than the 18.8 million tonnes currently forecast by Agriculture and Agri-Food Canada. An official Statistics Canada estimate will be released at the end of August.
Read Also
U.S. grains: Soybeans fall as rapid harvest overshadows China trade hopes
U.S. soybean futures closed lower on Friday as pressure from a fast-advancing U.S. harvest offset early-session support from hopes that upcoming U.S.-China talks could revive stalled soybean trade.
Meanwhile, Australia’s canola crop is also unlikely to reach the record levels hit last year, leaving tighter exportable supplies from the two countries overall.
“We’ll have a bit of a rationing job to do in canola,” Ball said, adding “we’ll have to discourage demand somewhere down the line.”
Current futures prices were too low to seriously ration demand, he said. While that will happen eventually, whether it happens in a week or six months remains to be seen.
Activity in the U.S. soy complex could also provide some direction for canola, with spreading against soyoil a feature in the market, according to Ball. The U.S. Department of Agriculture releases updated supply/demand estimates on Friday, with traders watching closely for any surprises in the data.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
