ICE weekly outlook: Loonie’s rally kept canola lower

CBOT soymeal, soyoil also drag on canola

ICE May 2020 canola (candlesticks, in Cdn$) and CBOT May 2020 soymeal (yellow line, US$). (Barchart)

MarketsFarm — Canola prices dropped over the last week due to a combination of factors, according to David Derwin of PI Financial in Winnipeg.

The Canadian dollar was one of those factors, as it had a small rally that pushed the loonie to almost 72 U.S. cents. That rally ended Wednesday, however, when the dollar lost a penny in the morning. Support for the loonie came from gains in stock markets, Derwin said.

Traders had been concerned of weakening futures, which saw a move to buy U.S dollars; however, that shifted the other way on Wednesday, he said.

Soymeal and soyoil prices at the Chicago Board of Trade also factored into canola’s drop last week, according to Derwin.

“Soymeal was weak and soyoil over the last couple for weeks has been basically sideways,” he said.

Low crude oil prices also played into canola prices. The steep drop in crude, stemming from the Saudi Arabia/Russia price war and very weak demand for oil because of the COVID-19 pandemic, held down soyoil and corn. In turn, that spilled over into canola.

Reports have stated the agreement between OPEC, Russia and the G20 to slash global crude production by 13 per cent hasn’t provided any confidence in the U.S. biofuel market, as crude prices have yet to gain any significant traction.

As the world grapples with the pandemic, which has caused economic turmoil and is very likely to trigger a deep economic recession, Derwin said the markets will experience volatility.

“Big fluctuations both ways are to be expected in most markets,” he said. “That could provide some good hedging opportunities, so you want to get ready for those.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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