Canola contracts on the ICE Futures Canada trading platform moved higher during the week ended Wednesday (July 10), with much of the strength linked to the commodity following the gains seen in Chicago soybeans.
Traders were said to be building a weather premium into the U.S. soybean market, as they got “edgy” with forecasts calling for hot, dry weather in July, said Ken Ball with PI Financial in Winnipeg.
“It’s not that they’re (the U.S.) really having any bad weather, they aren’t,” he said. “But, July always worries traders because it always turns a little warmer and a little drier and they tend to get worried that the crops will suffer.”
Though canola futures were mostly just following along with the Chicago soybean market during the week, weather concerns could spark the commodity to see some independent movement going forward, Ball said.
“Canola traders don’t seem to be as focused on weather as the U.S. traders,” he said. “We may find some greater focus on Canadian weather next week (July 14-20).”
Some growing regions in Western Canada will be looking for a good rain during the week of July 14-20 if a precipitation event doesn’t occur before then.
Ball noted that if it continues to be hot and dry, a weather premium could be built into the Canadian canola market.
“I think traders will start getting a little edgy if we don’t see some better rains appearing,” he said. “Not that the crops are deteriorating at all, but farmers would also like to get a rain at least once a week.”
Weather will be the main price driver going forward, with support pegged around $540-$545 per tonne for the November contract and upper resistance in the $570-$575 range.
“It’s largely a range-bound market but it’s still early in the growing season and there’s lots of room to swing in both directions yet,” said Ball.
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.