As always, canola follows soyoil, loonie

Right now this well-established relationship is calling many of the shots

When the loonie rises it can quickly wipe out what otherwise would have been market gains.

It’s the same old, same old when it comes to the relationship between the values for canola, soyoil and the Canadian dollar.

Soyoil and the dollar are the leaders and canola is the follower.

Over the course of last week that relationship was quite evident. After the November canola contract closed on July 10 at $479.50 per tonne, it slipped to $477.40 on July 13. That Monday soyoil on the Chicago Board of Trade (CBOT) lost 0.14 of a U.S. cent to close at 28.08 cents per pound. Also, the loonie gained 0.15 of a cent. Any increase in the dollar makes Canadian exports more expensive.

The movement of soyoil and the loonie continued throughout the week. When canola was up, then soyoil was up and the loonie was down. However, there can be times when that’s not always the case. The exception to the rule came on July 15 as Chicago soyoil increased by just over a third of a cent – an otherwise marvelous gain that normally would have meant canola going up as well. Instead the Canadian dollar jumped by 0.45 of a cent, effectively wiping out any ideas of canola passing $480/tonne that day.

A stronger gain in soyoil on July 16 resulted in canola reversing its course to finish at $479.40. That was despite the loonie remaining relatively firm that day.

It’s also worth noting that canola most often lags behind whatever movement there is in soyoil. One trader explained that product values can rise $6 to $8 in a day, but that usually means canola going up by $2. That can be somewhat frustrating when you’re looking to glean a profit from canola, but should ‘beanoil’ fall, then the losses for canola aren’t near as bad.

Overall canola was range-bound last week, leaning to the high end, but unable to hold above resistance at $480 despite numerous attempts.

As crops on the Prairies are said to be in pretty good shape as July begins to wind down, there may not be any reason for canola to push higher. Well, not unless for some reason soyoil suddenly skyrockets and the loonie takes a dive.

About the author


Glen Hallick - MarketsFarm

Glen Hallick writes for MarketsFarm specializing in grain and commodity market reporting. He previously reported for Postmedia newspapers in southern Manitoba and the province’s Interlake region.



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