ICE weekly outlook: November canola could re-test $500

ICE canola contracts moved higher for the seventh consecutive week during the period ending March 19. (Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts moved higher for the seventh consecutive week during the week of March 12-19, following strength seen in the Chicago soybean market.

Funds were also moving money into commodities, which helped to lift both soybeans and canola, according to Errol Anderson of ProMarket Communications in Calgary.

“What’s driving this whole thing is fund money. It’s coming out of the equities and it’s pointed into our world,” he said. “It’s driving the soybeans and canola is going along for the ride.”

The market has moved higher than the trade expected it would at this time of the year because of speculative fund buying, and it looks as though the November canola contract could test the $500 per tonne level once again, Anderson said.

But there will likely be a trading day coming in the near future that will see the canola and soybean markets drop sharply.

“All it takes is a large fund in soybeans to decide to move out, and it’ll trigger a domino effect on the market,” Anderson said.

Since nobody knows when that will happen, the future of the market in the near term is “incredibly unpredictable,” he added.

The canola market is also starting to look overbought, so traders will be watching to see whether or not prices can sustain the strength until the end of the month.

Looking further ahead, canola futures will likely see some big swings in late March/early April, as the fundamental situation for soybeans is not bullish anymore, Anderson said.

Right now, China is still taking deliveries of U.S. soybeans because the U.S. is not allowing Chinese buyers to get out of their contracts, which is supporting soybeans, he added.

But going forward, China will likely start buying only from South America, where supplies are less expensive.

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

 

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