As February winds down, canola has altered its course. Instead of the dreary downward trend that gave little joy, the oilseed is headed toward a bumpy road.
Like frost boils and potholes marking roads throughout the Prairies, canola began facing a future of ups and downs last week. While the Intercontinental Exchange saw a short-lived rally and will experience more, there will also be stretches of decline. This means canola is likely to remain rangebound for the time being.
For the week ended Feb. 22, canola made small gains, a change from its earlier downward spiral. Its nearby March contract tacked on $3.40 to close at $570.40 per tonne, while the much more heavily traded May contract added $4.30 over the week to reach $581.30/tonne.
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The peaks came just before and immediately after the holidays in Canada and the United States. On Feb. 16, the March and May contracts added $10.40 and $10.70 respectively, reaching $577.40 and $587.70/tonne. They topped off at $584.80 and $593.40 at the close on Feb. 20.
Being rangebound, the “heyday” of $600 canola could be over, at least for now, with some participants believing resistance lies around $620. On the flip side, this could also mean prices may not bust through their support level of $550.
One glimmer of hope for better prices is likely to come before spring planting, as there’s often some improvement before farmers start making their rounds.
Until then, Statistics Canada is set to publish its principal field crop areas report on March 11. That will provide a better idea of what farmers are planning to sow in 2024. Given the Prairies’ warm winter and low subsoil moisture levels, there could be changes. There’s speculation that farmers in southern Alberta could start planting sometime next month if temperatures stay unusually warm.
In the end, the upcoming StatCan report is unlikely to have a major impact that would redefine the tone of ICE canola futures. Another report that could shift markets is scheduled March 28, when the United States Department of Agriculture releases its planting intentions.
Depending on soil conditions in the continental U.S., the never-ending battle for acres between corn and soybeans might generate some market movement on the Chicago Board of Trade. The spillover could be positive or negative for canola.
On the other side of the world, South America is poised to harvest hefty soybean crops, despite more reductions in estimates for Brazil, and now in Argentina. The weather has played havoc with the latter’s crops, thanks to a stretch of very hot and very dry weather. Since then, rains brought some respite, but concerns remain as to how much damage was done. Nevertheless, an ample amount of South American soybeans will be readily available for the global market, adding pressure to North American oilseeds.
Technology giant Nvidia has issued its fourth-quarter earnings report and handily beat analysts’ expectations, providing a boost to the overall stock market. Ripples from its movement on the market are often felt among the equities and commodities. So far, Nvidia’s increased market capitalization hasn’t had much effect on canola or the other grains. Red seems to be their favourite colour.
