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ICE weekly outlook: Rangebound canola vulnerable to losses

MarketsFarm — ICE Futures canola contracts moved lower during the week ended Wednesday and may have more room to the downside, despite persistent harvest delays across Western Canada.

“Overall, we’re still rangebound, but we’re going to the lower part of the trading window,” said analyst Errol Anderson of Pro Market Communications in Calgary.

“Canola is vulnerable to a $10-$12 decline,” he said, placing support in the January canola contract at $455 per tonne, with the next major support at $447 per tonne. The contract settled Wednesday at $462.40 per tonne after touching a session low of $457.10.

The possibility of a trade deal between the U.S. and China has provided some support for the Chicago Board of Trade soybean market recently, leading to some spillover buying interest in canola. However, Anderson was uncertain an actual deal would be reached anytime soon.

While Chinese purchases of U.S. products may increase, he expected they would remain well below normal. “I think China will continue to play the long game,” he said — although he expected the markets will trade off of the headlines, which could lead to choppiness.

With the bias pointed lower in the futures, Anderson recommended farmers keep their eyes open for basis premiums from domestic crushers, as the processors enjoy favourable margins.

Wide carrying charges between the March and January contracts could also represent some opportunities for producers who can hold off on delivery.

— Phil Franz-Warkentin reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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