Canola prices continue to be stuck in the same narrow trading range that has held
since April. The July futures contract is showing strong support near $590 per tonne, but can’t muster up enough momentum to stay above $630 per tonne.
The bearish influences of lagging export sales and relatively large commercial stocks
for this time of year are offsetting the positive effects of surging crude oil and
spillover strength from soybeans due to the ongoing Argentine farmer strike. Even
weather conditions seem to be offset as well, with setbacks due to dryness and frost in
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some dry areas of the Prairies this week should be helpful to overall conditions.
The canola marketing window is rapidly narrowing for old crop, and downside risks
are present. Improvement in Prairie growing conditions, resolution in Argentina or a
pullback in the unpredictable and highly volatile energy markets could quickly take
$1 per bushel or more out of the market. Producers deciding to sell at this point could
benefit from shopping around for the best opportunity, as basis premiums can be
found when elevators periodically get caught a bit short for loading trains.
While downside risks exist, there is always potential to see a late-season rally as well.
Crusher demand remains strong, and it’s not too late to see the so far elusive pickup
in export sales. The market will likely continue to be on edge since the Canadian crop
is still a long way from being made, the long-term oilseed fundamentals remain
friendly and the recent pullback in crude oil may be nothing more than a minor
correction in a larger bull market.
— The FarmLink Market Insight was researched and produced by FarmLink Marketing Solutions, a marketing advisory service for Prairie farmers, and is published here with permission of the authors.
