MarketsFarm — Although there remains a lot of canola to be combined, one trader believes most harvest pressure on the market has already passed.
“The farmers who wanted to sell off of the combine or shortly after, probably have done so already,” said Jerry Klassen, an independent Winnipeg commodities trader.
There will still be some pressure yet to come, he said, estimating more than half of the canola across the Prairies has yet to be harvested. He stressed it won’t be as prominent as a few weeks to a month ago.
After frost Tuesday heading into Wednesday, Klassen said there is now a risk premium for canola as there’s a measure of uncertainty regarding its quality. Canola lying in swaths is better able to withstand temperature dips below 0 C than canola that’s still standing, he noted.
In turn, that has raised questions about the quality of the canola remaining to be harvested.
“The crushers can use the lower-quality canola, but it won’t go for export,” Klassen said.
Nevertheless, he said there was still good commercial and speculative demand that was underpinning the market.
Once canola rises past $500 per tonne, he said, it often continues to rally. That’s what happened Tuesday when November canola jumped $7.20, to close at $510.90 per tonne. At one point in that Tuesday session after the Labour Day long weekend, canola was up by more than $10.
While frost certainly played a role in that spike, another trader said it wasn’t the strongest factor.
Ken Ball of PI Financial in Winnipeg pointed to canola lagging well behind its product values and it finally caught up that day. Ball estimated the frost added about $2 to the price of canola.
The weight of those product values was certainly felt Wednesday as most of the previous session’s gains were given back. Soyoil at the Chicago Board of Trade dropped by more than a quarter of a cent, and combined with a stronger Canadian dollar, canola was forced to pull back.
— Glen Hallick reports for MarketsFarm from Winnipeg.