Attention in ICE canola turns to weather

ICE Futures Canada canola contracts edged have edged higher over the past week as wet conditions that could hamper spring seeding across much of Western Canada provided some underlying support.

The weather issues are expected to continue to be a major factor in the trade moving forward.

The release of the U.S. Department of Agriculture’s Prospective Plantings report on Wednesday was expected to provide some short-term direction for the oilseed markets. But attention will quickly turn to actual seeding conditions and the weather heading into spring planting in North America.

The 15-day weather forecasts call for showers across at least 75 per cent of the Prairies for April 4-8, said Jerry Klassen, manager of GAP Grains in Winnipeg. “It looks like we’ll have some rain and snow, and it looks like temperatures will drop below zero until April 15,” he said.

“That makes the market a little cautious,” said Klassen, adding that end-users were putting in a risk premium into the futures given the uncertain production prospects.

“There is the potential for huge acres, but as it looks now, we will not be seeding any of those acres in April,” he said, adding that “I think the market is a little uncertain on production, and until we actually see some better forecasts the market will hold value.”

Some commercial crusher and exporter demand was providing support under the market, as they work to make sure they have enough coverage going forward, he said.

Drier conditions in rapeseed-growing regions of France and Germany should also remain somewhat supportive for canola values, according to Klassen.

On the other side, producers were using the recent bounce in prices as an opportunity to liquidate some stocks before spring and to generate some cash flow for seeding, said Klassen.

In addition to the direct fundamental weather issues, outside factors could also provide some direction for the agricultural markets going forward, said trader and southern Manitoba farmer Bill Craddock, pointing to outside developments that could sway the speculators, such as disaster in Japan and military action in Libya.

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