ICE weekly outlook: Analyst sees canola spike late next month

Movement expected to roll out of November soon

ICE November 2021 canola (candlesticks) with Bollinger bands (20,2). (Barchart)

MarketsFarm — As the canola harvest winds down on the Prairies, ICE Futures canola began to climb upward in approaching $900 per tonne, the upper limit of its range.

That’s given Winnipeg-based analyst Wayne Palmer of Exceed Grain reason to believe canola will bust through $900 per tonne.

“That’s all due to the drought and canola is just around the corner from breaking out and I think, taking a moonshot as well,” Palmer said.

“Canola is going to be traded methodically. I think the fireworks are towards the end of October.”

Palmer based that on increases seen on the Chicago Board of Trade (CBOT) during harvest in the United States. His forecast has been based on yields in the U.S. coming in below average and that end-users are buying now rather than waiting until harvest is finished.

On top of that, the U.S. dollar has spiked in recent days, which would otherwise push prices downward.

“Everything should be a bearish scenario and not a bullish scenario,” he said.

Palmer likened canola to Chicago oats, which were pushing toward US$6 per bushel due to the drought-stricken crop providing low yields.

Besides what’s been happening at the ICE and CBOT, European rapeseed and Malaysian palm oil were hitting new contract highs — which also underpinned canola values.

As well, Palmer said “everyone is short” when it comes to their canola.

As October is about to begin, there will soon be movement to roll out of the November contract into January and other positions.

With growing expectations of the canola harvest coming up short of 12.8 million tonnes forecast by Statistics Canada, the trade will want to move when it can.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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