CNS Canada — ICE Futures Canada canola contracts moved lower during the week ended Wednesday, with the biggest losses in the new-crop months as the July/November spread moved back to an inverse.
“That spread is not going to be at carrying charges again until the producer sells it, and if he doesn’t sell in June… that spread is going for a ride,” said Wayne Palmer, senior analyst with Agri-Trend Marketing.
Traders holding positions in July canola will need to see some more farmer selling in order to get out of the front month, he said.
However, while farmers have supplies to sell, they don’t like these current prices and are unwilling to make sales on the way down.
For the new-crop November, funds are putting on a short position, and Palmer expected to see them add to those shorts as prices move lower.
With good crop prospects so far, “the only miracle on the upside will be a weather scare; otherwise everything looks bearish,” said Palmer.
“If we don’t get a weather scare, these will be high prices at harvest time,” said Palmer on the current pricing levels. As a result, he recommended producers lock in a portion of their new-crop canola now.
However, a weather premium could develop quickly and “as soon as the weatherman says a high ridge is developing, that will take it up,” said Palmer.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.