Despite all the volatility in the markets over the last seven days, ICE Futures canola values ended up pretty much where they started.
On March 10, the nearby May canola contract closed at $1,130.70 per tonne; a week later it finished at $1,130.20. It was a similar story for the July contract, at $1,096.40 per tonne a week earlier and closing at $1,197.30 on March 17.
The ride in between was wild, but as with other edible oils, it was one controlled by the ebbs and flows of global crude oil prices. The latter in turn saw its fortunes guided by the Russian invasion of Ukraine and COVID-19 machinations in China.
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West Texas Intermediate, the main North American benchmark crude oil, was about US$105.70 per barrel on March 10, only to fall back on trade consternation toward the sharp increase of COVID-19 in China. With China being the world’s top importer of crude oil and pretty much everything else, any threat to its thirst for oil is immediately felt in the markets.
Adding to the downward pressure on crude were comments from Ukrainian President Volodymyr Zelensky. He stated that ceasefire negotiations with the Russians were becoming realistic and there was a slim chance for an agreement.
But in these volatile times, what goes down invariably climbs back up. Concerns toward China eased as the country grappled with its latest coronavirus outbreak and Russian President Vladimir Putin contradicted Zelensky, kiboshing any small chance of an end to the bloodshed and destruction. Crude oil regained much of the ground it lost, reaching US$103.70 by March 17 as it brought along edible oils along for the ride.
In the midst of this roller-coaster week were wheat prices, as they too travelled the volatility expressway.
When Russia invaded Ukraine on Feb. 24, wheat prices skyrocketed, but analysts and traders warned a big tumble would come sooner or later. They prophesied that when Chicago wheat took a header, then the other commodities would quickly follow — which, to some extent, pretty much happened during the past week, but the big tumble proved to be a small stumble. Like canola and crude, the U.S. wheat futures brought their decline to a halt, and turned around — especially when reports indicated there were about 15 million tonnes of wheat holed up in Black Sea ports, unable to flow onto the world market.
As for canola, adherents to the charts believe it will continue to grind higher, especially if the Canadian oilseed’s value lags behind soybeans, rapeseed and palm oil. With reports suggesting crude was set to hit US$110 per barrel, further increases in edible oils seem to be assured.
However, that huge drop analysts and traders warned about still looms somewhere in the distance.
