MarketsFarm — To market analyst Wayne Palmer of Exceed Grain, canola “has been in a world of its own for about the last month,” and he expects that will remain the case for some time.
Canola, he explained, has generally done the opposite of the Chicago soy complex — which the Canadian oilseed normally follows.
‘ICE canola’s May contract on Tuesday lost about $38 per tonne at one point, he noted, and while it regained a good amount of strength, closing with a $9 loss, the soy complex remained weaker.
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“Canola is really a dysfunctional future right now,” Palmer said.
“The funds of course are long on canola. They got spooked. They liquidated a good chunk of their position yesterday.”
There has also been very little farmer selling, according to Palmer. Farmers are essentially out of old-crop canola, but are holding back about 10 to 20 per cent of it in hopes of cash prices hitting $30 per bushel. Price and Data Quotes cited cash prices between $24-$25 per bushel on Wednesday.
Also, he said, only the locals and the algorithms were playing the market — and commercials were not trading, for the most part.
“[They] will only if they buy from the farmers and put in a hedge,” Palmer said, noting the commercials weren’t speculating on the spreads or the flat price.
No one wants to get caught short, he said, especially with such record-high prices for canola.
“There still could be a tremendous squeeze on the July/November spread,” he said.
Going into spring planting, the analyst said the coming crop is based on a successful season with sufficient moisture to produce an average to above-average harvest. Canola, he emphasized, cannot afford another drought on the Canadian Prairies.
“These prices are going to stay here, unless the whole picture changes. That means the war [in Ukraine] gets settled, North American gets a huge crop and you run the funds to the downside.”
— Glen Hallick reports for MarketsFarm from Winnipeg.
