CNS Canada –– ICE Futures Canada canola contracts climbed sharply higher during the week ended Wednesday, but additional gains will need some more bullish news as the market takes a breather and consolidates.
A combination of a rally in CBOT soyoil, a weaker Canadian dollar, fund buying and a weekend frost all contributed to the bounce to new highs in canola, according to analyst Wayne Palmer of Agri-Trend Marketing.
While further gains or a turn lower are both possibilities, Palmer expected canola would first see some consolidation as traders assess just how much damage was done by the recent frost.
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He expected canola area will likely end up well below the 19.4 million acres estimated by Statistics Canada, which should be a supportive influence overall.
Dryness concerns in Alberta and Saskatchewan should also remain supportive heading through the growing season.
As a result, Palmer said, the downside may be limited in canola without a rally in the Canadian dollar, or a collapse in soybeans.
CBOT soybeans did hit contract lows recently, and could be headed lower given great U.S. crop prospects, according to U.S. analysts. However, Palmer noted there was still plenty of time for a weather scare to materialize.
“We’ll need more bullish news to keep fueling the fire,” he added.
From a chart perspective, both old- and new-crop canola contracts ran into resistance just under the psychological $500 per tonne level during the week.
Palmer said a break above that point could set the stage for a move to $525. However, if the market tries and fails, a move back to $475 is likely.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
