ICE weekly outlook: Canola looks set to stay above $500

(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts don’t appear to be in much danger of falling below the $500 per tonne level anytime soon. Both front-month contracts spent much of the week ended Wednesday hanging around the $520 mark.

Surging action from the U.S. soy complex has kept canola supported, even on days when the Canadian dollar is higher, a Winnipeg-based trader noted.

“There’s been support from both bean oil and meal,” said Keith Ferley of RBC Dominion Securities. “The meal is screaming higher which is supporting the crush margins.”

Farmer selling has been slow due to the seeding season, which also underpinned canola.

Spreads have been few and far in between, likely as a result of sparse fund activity. As a result, volumes have been fairly quiet.

“You’d think we should start to see some movement from commercials and others out of this July (contract) but I guess there’s still a little bit of time left on that,” said Ferley.

Things may change, he said, once farmers come out of the fields and have some time on their hands.

“If the crop comes up looking good, we could see some more movement, i.e. bin-emptying,” he said.

The crush is also improving, he noted, which is also bringing in some additional interest.

On the other side, rain over the weekend of May 20-22 helped alleviate concerns over excess dryness in Western Canada.

“Alberta got some rain over the weekend; now Manitoba is expected to get some showers. Eastern Saskatchewan should get some.”

Despite that, Ferley said, canola doesn’t appear ready to drift below the $500 level anytime soon.

“I think so, it feels pretty comfortable. We’re going to need some major movement to get back underneath that,” he said.

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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