ICE weekly outlook: Lower loonie may limit canola’s losses

CNSC — ICE Futures Canada canola futures moved higher during the week ended Jan. 22, seeing a slight recovery after falling to fresh contract lows.

The large Canadian canola supply situation and problems getting the product to end users because of logistics issues in Canada will keep the path of least resistance pointed lower, analysts said.

The difficulty getting the crop to its final destination creates a risk to the buyer, who is still in control of the market, said Errol Anderson of ProMarket Communications in Calgary. He added prices will continue to drift lower until the seller regains control.

Anderson expects the market to retrace its steps down to fresh contract lows, finding support at the $420 per tonne level in the March contract.

If it drops below $420, the market will likely test the $400 per tonne level, Anderson said, adding it will probably do it in steps until prices find a bottom.

But prices won’t likely fall as far as the trade originally anticipated.

“With the Canadian dollar really dropping the way it is, the drop in canola might not be as deep as what we thought a month ago,” said Anderson.

The Canadian dollar fell Wednesday well below the US91-cent mark, losing almost four full cents against the U.S. currency since late December.

Even though the futures are expected to continue drifting lower, Anderson anticipates the cash market could see some upward movement.

“Basis levels might improve. There might be some spring premiums coming,” he said. “If the buyers need to secure supplies, they’ve got lots of room in the basis levels to put out these premiums.”

“They may not be big premiums, but nonetheless, they will show up.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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