ICE weekly outlook: Volatility day-to-day in bullish canola market

ICE May 2021 canola with 20-, 50- and 100-day moving averages. (Barchart)

MarketsFarm — The ICE Futures canola market saw some large price moves during the week ended Wednesday, hitting fresh contract highs in many months before profit-taking came forward to weigh on values.

With canola trading at historically high price levels, the potential volatility in the marketplace can go to extreme levels without much explanation, analyst Mike Jubinville of MarketsFarm Pro said.

“The fundamental circumstances of the marketplace haven’t changed, but you have this crazy volatility,” he said of the current state of the canola market.

While there was room for more strength in canola, he said, producers should still price some of their production at the current profitable levels.

“In this kind of environment, when the circumstances change they will change hard and they will change fast.”

The looming South American soybean harvest and expectations for declining demand from China through the Lunar New Year holiday should weigh on prices in the near term, he said.

“In a volatile space led by speculative traders, wild things can happen,” Jubinville said, but added that the underlying fundamentals of tightening stocks remained supportive.

Visible supplies are sufficient for now, but will eventually tighten over the next few months. When that happens, any weather issues with the new crop could easily spark another rally.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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