ICE weekly outlook: Canola up, watching beans

(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts posted solid gains during the week ended Wednesday, despite the release of a relatively bearish Statistics Canada production report during the period.

StatsCan pegged the country’s 2014-15 canola crop at 15.5 million tonnes — about 1.5 million tonnes above earlier guesses and well above average pre-report trade guesses. However, canola rallied in the days following the release of the report last Thursday (Dec. 4).

Solid export demand and a weaker Canadian dollar both provided some support for canola, but future strength will likely be dependent on activity in the U.S. soy complex.

“We’ll be subject to the trends established in beans, meal and especially soyoil, until further notice,” said Mike Jubinville of ProFarmer Canada.

The larger-than-expected Canadian canola production estimate from StatsCan should be seen as a bearish factor, he said, with the trade likely now thinking the actual number is larger still, given the tendency of farmers to understate how large their crop is.

While the ample Canadian supply situation and seasonal trading flows point to a weaker tone in canola, Jubinville added there was also still a strong level of commercial interest underneath the market. Both domestic crushers and international buyers will be hunting for bargains on any moves lower.

That strong end-user demand could be seen in the move back to an inverse in the futures, with the nearby January contract once again trading at a premium to the more deferred positions.

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

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