Canola futures on ICE Futures Canada moved higher during the week ended Wednesday, following along with the weather rally that was lifting U.S. soybean futures.
Soybean futures on the Chicago Board of Trade (CBOT) rallied recently due to concerns about hot and dry weather reducing yield potential in the U.S.
Similar weather conditions have been seen in Western Canada as well, and there are some concerns about hot, dry conditions reducing yield potential for some canola crops.
But brokers say the hot, dry weather is doing more good than harm in Western Canada. Recent warmer temperatures have sped up crop development, which will help canola avoid frost damage before harvest.
The canola market did lag soybeans to the upside during the week, mainly because a record large Canadian canola crop is still expected for 2013-14.
Going forward, U.S. weather will be the determining factor with what happens in both soybean and canola markets, said Errol Anderson of ProMarket Communications in Calgary. Though, the near-term trend seems to be pointed upward, and could build up to a sell-off, he added.
If weather conditions continue to be hot and dry, further reducing the yield potential for U.S. soybeans, canola futures could move up another C$10 to $20 per tonne, said Anderson.
"However, it's a weather market and if we come in next week with rain in the forecast in the U.S., then canola will drop $20 (per tonne) quickly," he added.
Because it's a weather market, he said, it's impossible to accurately predict what's going to happen in both canola and soybean markets going forward.
"I don't think anybody in the world knows (what's going to happen)," he said. "All we know is that it's going to be swinging."
-- Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.