ICE weekly outlook: Canola holds over $600

ICE January 2021 canola (candlesticks) with 20-day moving average (yellow line) and CBOT January 2021 soyoil (green line). (Barchart)

MarketsFarm — ICE Futures canola contracts were stronger Wednesday, hitting multi-year highs for three consecutive days.

The nearby January contract closed at $602.90 per tonne on Wednesday, gaining nearly $10 since Friday’s close of $593.60.

Ken Ball of PI Financial in Winnipeg said canola is expected to go higher in order to “kill off some demand.”

Supplies are forecast to be tight going into spring and summer of 2021, and prices will need to rise in order to discourage demand, he said.

“That’s what rationing has to do, otherwise we’ll run out of canola.”

Some market participants expect carryout to go as low as 700,000 tonnes, which Ball described as “lower than is feasible within the industry.”

Canola, he said, has to find a way to kill off between 300,000 and 600,000 tonnes of potential demand.

“[Prices] are going to have to stay quite strong in order to do that.”

Crush margins have dropped by about $50 over the past few weeks, but are “still quite comfortable.” Margins are expected to drop even lower, which will also discourage some demand for canola.

The Canadian dollar has been keeping a lid on further gains for canola prices this week, as the loonie has remained around 78.5 U.S. cents.

Canola has gleaned strength from comparable vegetable oils, as dry growing conditions in South America have given Chicago soyoil contracts a boost. The nearby January contract closed at 39.05 cents/lb. on Wednesday.

— Marlo Glass reports for MarketsFarm from Winnipeg.

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