ICE weekly outlook: Soyoil, not weather, main influence on canola

ICE November 2018 canola (candlesticks) and October 2018 soybean oil (green line). (Barchart)

CNS Canada — Wet and snowy weather now plaguing the Prairies isn’t to blame for the canola market’s recent upswing, according to one trader.

“Canola’s been firm but it really hasn’t shown any reaction whatsoever to the weather; it’s going up because bean oil’s going up and it’s lagging the bean oil gains by quite a bit,” said Ken Ball of PI Financial in Winnipeg.

The canola market hasn’t made large gains, though, due to it still being “very, very expensive” compared to soybeans, according to Ball.

The soybean market is currently seeing pressure from the overhanging threat of a very large U.S. soybean crop this year, which is influencing the canola market.

Currency fluctuations are also having an effect on the canola market. The Canadian dollar rose earlier this week due to trade optimism from a renegotiated North American free trade agreement. Before that, however, the dollar had been on the decline.

According to Ball, it’s a complicated situation for canola, as there isn’t a weather premium in the market currently. Depending on how the rest of the fall turns out, the weather could affect the market in the long run.

“Traders have to be prepared for possible significant shifts that could occur, especially if the weather does improve later in October and then the harvest gets rolling a little more aggressively. We could see a lot of price pressure coming on canola.”

The canola market should remain fairly well underpinned for now, according to Ball.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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