ICE weekly outlook: Farmer selling to limit canola gains

CNS Canada — ICE Futures Canada canola contracts dropped sharply during the week ended Wednesday, but managed to recover off of those nearby lows with oversold price sentiment and an increase in commercial demand providing some support.

Further gains may be hard to come by, however, as large unpriced supplies overhang the market.

The nearby May canola contract lost roughly $30 per tonne in the span of two days (March 20 to 21), before gaining steadily the following three sessions to be only $10 off its nearby high of about $469 per tonne. However, farmer selling is said to be picking up as prices move back up, which could limit any further strength above that level.

“We are firm in canola, but are also bumping into some selling as it moves up,” said Ken Ball of PI Financial in Winnipeg. He said any strength in the market should be seen as a good selling opportunity for Canadian canola producers.

“There is just a mountain of canola waiting to be sold — a mountain bigger than any we’ve ever seen before,” said Ball, adding “there are thousands of growers out there who have not yet sold one tonne of last year’s canola.”

Those producers, he said, will need to make sales now in order to generate some cash flow ahead of spring planting.

On the other side, Ball said routine commercial demand would provide some support for canola, but noted that end users were also not looking to push values higher.

Speculators, meanwhile, have been noted buyers, with more chart-based buying a possibility depending on what happens in the CBOT soy market.

The U.S. Department of Agriculture releases its quarterly stocks as of March 1 report on March 31, which has led to volatility in the grain and oilseed markets in past years. USDA also releases its prospective plantings report on March 31.

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

 

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