Glacier FarmMedia | MarketsFarm — Canola futures on the Intercontinental Exchange will likely resume climbing higher, given production uncertainly and increased Chinese demand, said broker Ken Ball of Ventum Financial in Winnipeg.
Since a significant correction on Oct. 15, the January contract has added C$36 per tonne to trade at its highest level in two-and-a-half months.
Ball pointed to the uncertainty about Canada’s canola crop as the trade is concerned it might end up being below Statistics Canada’s estimate of nearly 19.0 million tonnes. The federal agency is set to release its next principal field crop report in early December.
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Meanwhile, Ball looked back to early September when a panic rumbled through the canola market. That came after the Canadian government announced a 100 per cent hike on imports of electric vehicles made in China, as well as less stiff increases for steel and aluminum. In retaliation, the Chinese government launched an investigation into alleged canola dumping by Canada, with the results expected within the next 12 months.
“And then we had the news the carryover stocks were way bigger than expected, because StatCan fouled up all of the crop reports,” the broker stated. “Since then (canola) flipped the other way. China is buying. The buyers obviously have an agreement with their government to buy up lots of canola prior to any action from the government.”
Other customers also continued to make purchases, Ball said.
“A lot of buyers are saying ‘we better scoop this stuff up early. We don’t want to be fooling around with a tight market in April.’” he explained, noting its remains uncertain as to what will become of the 2024/25 canola crop.
Ball added that the biofuel sector has made a positive impact on canola and other oilseeds, as demand grows. There has been a dramatic surge in Malaysian palm oil, with spillover finding its way to canola. As well, Chicago soyoil has been climbing moderately, lending more support to the Canadian oilseed.
However, the broker cautioned the buying spree will only last until China has met its needs, adding that eventually the Chinese government will come in to say, “that’s it boys, we’re shutting her down.”
