After a tumultuous week of downturns and upticks, ICE Futures canola moved a little, particularly in the nearby January and March contracts. In highlighting the markets going into holiday mode, the nearby January contract stepped back $7 per tonne since Dec. 9, while the March contract gained $4.
As the holidays approach, it’s clear traders want to get out of their long positions, despite the January contract not expiring until Jan. 15. The markets are faced with back-to-back short weeks, before trading picks up in earnest after marking the new year. Then there will be positioning ahead of the next supply-and-demand estimates from the U.S. Department of Agriculture (USDA), which are bound to affect canola values. The January S&D report will be particularly important, as it will provide USDA’s final 2021-22 numbers.
The specs have built up a massive long position that poses a serious threat to canola values. The thinking has been the specs are banking on comparable oils moving higher. Obviously there are more oilseeds other than Canadian canola that are increasingly hard to come by. The specs pushed the January over $1,000 per tonne, hoping to keep it there for as long as they could, waiting for that turnaround in other edible oils.
In turn, the question becomes: How long can you wait? If the specs have enough resources, they could hold tight. On the other hand, should those edible oils, especially Chicago soyoil, fail to climb higher, then canola would be headed for a quick slide. Some traders and analysts have speculated canola could tumble $50-$70 per tonne a day, testing those daily and expanded trading limits. There’s also the belief that if canola shed $100 per tonne, it would still be well overpriced compared to other vegetable oils.
And here the Hamilton Tiger-Cats giving up a single point to the Winnipeg Blue Bombers late in the fourth quarter of the Grey Cup was considered a gutsy and controversial decision.
In the overall big picture, if canola fell $50 or more, the fact is, the Canadian oilseed would remain far ahead compared to where prices were a year ago.
Those tight supplies will last for some time, requiring a measure of price rationing to keep an eye on exports.
