CNS Canada — ICE Futures Canada canola contracts drifted lower during the week ended Wednesday, but are still holding up rather well compared to the U.S. soy complex.

“Canola is very sturdy,” said Ken Ball of PI Financial in Winnipeg, noting the Canadian oilseed has gained about $55 per tonne relative to the U.S. markets over the past few weeks.

“It’s a different fundamental situation in canola compared to soybeans,” he said. “In beans we have an absolute tidal wave of supply coming at us, whereas in canola it’s penciling out fairly tight going into the summertime.

“How tight canola gets depends on how much of the canola still out in the fields we manage to get,” he said, estimating there could be 500,000 to 700,000 tonnes out on the field.

“If we get half of it in, it would certainly help a bit, but it’s just impossible to tell,” said Ball, noting farmers will likely try to do some combining while the ground is still frozen.

Strength in canola relative to soybeans has caused crush margins to narrow in. However, Ball noted, processors likely booked everything earlier in the year when margins were still wide.

As a result, he expected end users would remain aggressive buyers, with basis levels likely to improve.

“Barring a massive collapse in soybeans, the downside in canola is probably pretty limited.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.