MarketsFarm — Amid falling crude oil prices, canola prices are staying strong, largely due to the Chicago soy complex, according to a Calgary analyst.
Errol Anderson of ProMarket Communications has been impressed with canola’s recent rise. The January contract on ICE Futures was as low at $672 per tonne on Nov. 2 before rising to a week-long high of $709.50 five days later and eventually closing at $699.30 on Wednesday.
“We’ve gained about $30 per tonne and this has really been stimulated by the recovery in soybeans,” Anderson said. “The beans have also broken a near-term downtrend. Canola has been largely pulled up.”
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On Oct. 25, the January soybean contract was as low at US$12.975 per bushel before rising to US$13.845/bu. two weeks later. Extreme weather in Brazil has cooled off expectations for the country’s soybean crop and China has recently purchased cargoes from the U.S. Both of these events have caused soybean prices to rise, according to Anderson.
“But the U.S. dollar is starting to go back up again. Right now, U.S. soybeans appear to be fairly competitively priced. But I think there’s a possibility the U.S. dollar will be quite firm,” he said.
The support for canola has been timely considering crude oil prices have dropped to approximately US$75 per barrel for West Texas International and US$80 for Brent due to economic concerns.
“The demand side on crude oil is extremely weak right now,” Anderson said.
He added that the good times for canola may be coming to an end.
“With the washout in crude and the canola market going up, that is very positive,” said Anderson, although he added that these rallies may not hold.
Given recent losses in energy markets and a general deflationary outlook on commodities, Anderson recommended farmers take the opportunity to look at their cash sales as “soybeans will have a bad day and it will pull the canola market down.”
On the other hand, if canola becomes the beneficiary of fresh news, according to Anderson, prices could move up to $730/tonne.
“If we break through, there could be another $20/tonne, but the odds of that right now are a little bit low to sell those rallies,” he said.
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
