ICE weekly outlook: Cheaper canola could stir up export interest

ICE January 2019 canola, with 20-day moving average. (Barchart)

CNS Canada — The ICE Futures canola market has seen contracts become cheaper of late, which could lead to an increase in demand — but the market is also still closely following the ongoing saga between China and the U.S.

“Everybody’s just waiting for some kind of news regarding China possibly purchasing U.S. beans. They are buying beans in the futures market clearly,” said Ken Ball of PI Financial in Winnipeg.

Traders have been left waiting for news from China with many wondering if there would be an announcement or China would just start buying beans.

The answer was revealed Wednesday, when Reuters reported China had made its first major U.S. soybean purchase in more than six months, buying at least 500,000 tonnes of U.S. soybeans. Following the news, oilseed markets didn’t shoot up.

While the soy complex has been firm as of late, canola hasn’t been able to follow its lead. According to Ball, whereas canola was viewed as overpriced a few months ago, crush margins have improved and brought the price down. This is now holding canola back from following the soy complex.

“Hopefully now that it is more realistically priced, it may result in a perk up in usage in canola,” he said.

Ball thinks this could help the export market. According to data from the Canadian Grain Commission, as of Dec. 2, only 3,459,500 tonnes of canola has been exported this year, compared to 3,599,500 tonnes last year. He also expects crushers could become more active since the margins have improved.

“With a little bit of increased activity we should be able to bring canola stocks down at least a little bit this year,” he said.

As the holidays near, trade usually starts to quiet down. However, this year, with the ongoing China/U.S. drama, there is more excitement in the commodity markets. According to Ball, things are starting to quiet down for the canola market. Traders are also starting to position themselves for the New Year.

“Some of the big spec fund traders don’t want to wait until the last minute to start reducing positions at year-end or going into the holiday season. So they may be starting already unwind trades before year-end,” Ball said.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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