ICE weekly outlook: Canola looking overpriced

(Dave Bedard photo)

CNS Canada –– ICE Futures Canada canola contracts moved lower in sympathy with CBOT soybeans during the week ended Wednesday, and could have more room to the downside as the Canadian oilseed remains overpriced compared to its U.S. counterpart.

The canola premium compared to soybeans is the same now as earlier in the summer, when people thought canola would be in short supply, said Ken Ball of PI Financial in Winnipeg.

Near-term demand from crushers and exporters was keeping canola supported, as they don’t have enough supplies committed from farmers and need to push in the spot market to get canola moving.

However, once they get caught up, “canola will find itself in trouble,” Ball said, noting harvest operations are running relatively smoothly, with better-than-expected yields in many cases.

“On paper, canola supplies have gone from being desperately tight to relatively comfy in the space of six weeks,” said Ball, adding that there was little reason for canola to stay as relatively strong as it is.

Analyst Wayne Palmer of Agri-Trend Marketing, said the November canola contract was currently trading in a broad range between $450 and $480 per tonne.

Palmer agreed the Canadian canola crop continued to look better as harvest reports come in, which should prove bearish in the long run.

Statistics Canada releases its next survey based projections on the size of this year’s crop on Oct. 2. Both Palmer and Ball were expecting upward revisions from previous reports.

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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