ICE weekly outlook: Canola’s uptrend still intact

ICE May 2021 canola with Bollinger (20,2) bands. (Barchart)

MarketsFarm — ICE Futures canola contracts climbed to fresh highs during the week ended Wednesday, with no end to the uptrend in sight from a fundamental standpoint.

“We are in the middle of a demand-pull market… and the market has not yet done what it needs to do to accomplish the task of curtailing demand,” MarketsFarm Pro analyst Mike Jubinville said.

“We’re rapidly running out of canola on this side of the border,” he added, noting soybean supplies in the U.S. were also tightening.

“Even at record-high futures prices, basis levels for summer delivery are as much as $85 above the futures… which shows the demand is extraordinary,” he said.

Reports of Canadian crushers importing Ukrainian canola for delivery sometime this summer highlighted the tight supply situation.

Seeded canola area in Canada is generally expected to be up on the year, with Statistics Canada due to release its first survey-based acreage estimates on Tuesday (April 27). However, agronomic issues will likely limit the extent of the acreage increase.

Even with increased acres, “the demand pull in the market is so strong that we won’t be rebuilding inventory next year,” said Jubinville.

However, he noted, canola was looking overbought from a chart standpoint, which could lead to a profit-taking correction.

That said, it’s still too early for a sustained downward move, with every move lower a buying opportunity for the time being.

“(Canola futures) don’t have to be higher every day, but the trend is up until it tells us different,” Jubinville said.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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