ICE weekly outlook: Palm oil shortage leads to canola rally

ICE Futures January 2020 canola with 20-, 50- and 100-day moving averages. (Barchart)

MarketsFarm — As Malaysian palm oil continues to increase in price due a shortage, it has led to a rally in canola on ICE Futures, said Wayne Palmer of Exceed Grain in Winnipeg.

The shortage stems from dry conditions in Indonesia and Malaysia, the world’s top two palm oil producers. While the dryness has been alleviated somewhat in Malaysia, it continues in Indonesia, according to reports.

Some people believe the gains in palm oil will fizzle out, Palmer said, but he pointed to the continued shortage coupled with a strong demand which should sustain it for the time being.

In turn, palm oil has led to increases in soyoil prices on the Chicago Board of Trade (CBOT).

“Bean oil this week is up almost 100 points and that’s why canola is having a rally,” Palmer said.

Trading volumes have been terrible, though, he noted; other than “locals and a few speculators” there have been few exporters and farmers involved in the canola market lately.

“The farmer is not going to sell anything unless he can probably get $10.25-$10.50 a bushel,” Palmer said.

However, crushers have been buying as well, Palmer added. Although crush margins have slipped below $100, they remain in the high $90 range.

— Glen Hallick reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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