(Resource News International) — The drop in the cash price for canola in Western Canada over the past week was seen as only being temporary, with values likely to move higher now that a correction in the market has occurred.
“While some individuals were concerned that canola futures had collapsed over the past few days, a downward correction of $20 to $30 in the futures is nothing out of the ordinary,” said Mike Jubinville, a market analyst with ProFarmer Canada.
The market had been building toward that correction to the downside, and it finally kicked in, the analyst added.
“To me the downward move in the canola cash and futures markets was a combination of issues,” Jubinville said. “The bullishness of the oilseed market remains intact overall, but you can only go up straight for so long.”
The speculative money that has been on the long side of the July canola futures also has to liquidate at some point, and associated with that, you will also get some artificial downward pressure on values, he said.
The decline in futures, meanwhile, did not mean the drop in the cash market was as great, said Jerry Klassen, a wheat trader and market analyst.
“There was some narrowing in of basis, but the move was not as great as it could of been as demand for the commodity continues to remain constant,” Klassen said.
Farmer deliveries had also increased somewhat for a brief period of time, but overall they remain on the thin side, Klassen said.
The downward movement in cash prices also continued to be limited by the fact that CBOT soybean values continued to chug away to higher ground, said Gord Mitchell of Mitchell Grain Co. at Spruce Grove, Alta.
He expected movements in the futures and cash market would likely be extremely volatile over the next while, particularly in view of dryness in western parts of Saskatchewan and in Alberta.
Cool temperatures and the late seeding of the canola crop was also expected to cut into the yield potential, further limiting the downside in the cash market, Mitchell said.
The reduced use of fertilizers this spring by producers will also result in lower yield potential, he said.
“The only time we are likely to see some sort of relief is when Western Canada gets about two to three inches of a slow, steady rain,” Mitchell said.
Old-crop canola cash bids delivered to the elevator in Saskatchewan, based on data from Prairie Ag Hotwire, currently range from $9.72 to $10.29 a bushel, in Manitoba from $9.83 to $10.04 and in Alberta from $10.10 to $10.50. New-crop bids in Saskatchewan currently range from $9.63 to $10.15 a bushel, in Manitoba from $9.80 to $10.23 and in Alberta from $9.80 to $10.25.
A week ago, old-crop canola cash bids delivered to the elevator in Saskatchewan, based on data from Prairie Ag Hotwire, ranged from $9.67 to $10.79 a bushel, in Manitoba from $10.21 to $10.45 and in Alberta from $10.54 to $10.88. New-crop bids for canola in Saskatchewan were $8.96 to $10.43 a bushel, in Manitoba from $10.04 to $10.41 and in Alberta from $10.00 to $10.41.