ICE weekly outlook: Canola faces supply questions

(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts moved higher during the week ended Wednesday, as persistent weather problems in Western Canada and gains in world vegetable oil markets provided support.

“The most important variable for the canola market is trends in the global vegetable oil markets,” said Mike Jubinville of ProFarmer Canada, noting tight palm oil supplies were a major driver in the vegetable oil market.

In addition to activity in soyoil and palm oil, continued harvest delays in Western Canada should also keep canola well supported. Jubinville said many end-users, who had been anticipating a large crop, are likely under-bought.

The question now is, “How much canola is left out there, and how much will not be harvested until the spring?” said Wayne Palmer of Agri-Trend Marketing.

He pointed to the July 2017-November 2017 spread, which is trading at a wide inverse, as a sign that end-users are anticipating tight supplies.

While buyers will be looking to book coverage, farmers with canola still on their fields are unable to sell as they are also unsure whether they will be able to fulfill that commitment, said Palmer.

The U.S. soybean harvest is nearing its final stages, limiting the impact of harvest pressure from the U.S., which should also be supportive for canola, said Jubinville.

In addition, “canola is not expensive relative to competing oilseeds,” he said.

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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