ICE weekly outlook: Logistics issues weigh on canola

ICE Futures Canada canola contracts declined to fresh lows during the week ended Wednesday, and could be headed lower still as logistics issues in Western Canada continue to weigh on values.

The losses in canola came despite a rally in CBOT soybeans and sharp declines in the Canadian dollar relative to its U.S. counterpart.

Those two factors would typically be bullish for canola, but ongoing difficulties moving Canada’s record-large production out of the Prairies kept canola trading on its own bearish fundamentals, said market analyst Wayne Palmer of Agri-Trend Marketing in Winnipeg.

The weakness in canola “is all because of the transportation nightmare that is happening with the railways,” he said. There were buyers for Canada’s large canola crop, he added, but the grain companies are unable to make any forward sales because of the backlog in Western Canada.

Railways, he said, were focusing on moving products other than grain, and difficulties in railcar allocation were also causing delays.

While issues with the railroads are routine, given the fact that there are only two major routes through the Rocky Mountains to the West Coast, “this year it’s magnified, because prices are going down and we have a record crop to move,” said Palmer. “The grain companies can’t buy it, because they can’t move it.”

Palmer estimated Canadian grain companies were already at least seven to 10 weeks behind on past sales and said that it may not be until next fall or later before the system starts to clear up.

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

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