ICE weekly outlook: Strong canola price to spark selling

 (Dave Bedard photo)

CNS Canada –– Canola futures on the ICE Futures Canada trading platform moved sharply higher during the week ended March 5, with ideas that canola is undervalued compared to other oilseeds helping to lift prices.

Traders were said to be spreading against other oilseeds, buying canola and selling U.S. soybeans and products.

Political problems in Ukraine in early March also helped to lift North American commodity prices, as thoughts were that export disruptions in the region would lead to increased demand in Canada and the U.S.

With the recent rally, new-crop prices for canola, notably the November 2014 contract, are starting to look attractive for farmers, Ken Ball of PI Financial in Winnipeg said.

“Assuming you can get a closer to normal basis at some point, this is starting to pencil out in the $10 a bushel area for new-crop canola and I think you’re going to see quite a bit of selling coming in,” he said. “If we go $5 or $10 a tonne higher there will be even more selling coming in.”

Recent advances seen in canola futures are still just a “minor bounce” and the market’s recent low isn’t major, just near-term, he added.

The bounce hasn’t showed a peak yet, and how much higher the market goes from here will depend on how much farmer selling comes into the market, as well as conditions for the upcoming Canadian canola and U.S. soybean crops.

Problems moving canola out of Western Canada will continue to be monitored, though they are generally already priced into the futures, said Ball.

“Logistics problems are still there, but we’re starting to see crushers and grain companies in some areas having to push a little more when they need canola,” he said. “We’re starting to see that they have to work a little harder to pull canola out now, so the basis levels hopefully start improving.

“And as the weather gets a little better over the next two months, you’re going to see some of the logistics issues fade. Not completely, but it is going to get a lot better.”

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

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