Western Canadian canola cash bids continue to move upward with record crushing, solid export demand and chart-based buying providing underlying support.
However, ideas that canola may be oversold, along with uncertainty in the global macroeconomic picture, could temper the upward price potential in the long-term.
Mike Jubinville, an analyst with Pro Farmer Canada in Winnipeg, said much of the strength in the canola cash market continues to come from record domestic crushing and export demand. Currently, 300,000 tonnes more canola has been crushed halfway through the marketing year compared to this time last year, he said.
Meanwhile, export business continues to be strong. Solid Chinese buying is adding towards the firmness seen in canola prices, Jubinville said.
Southern Manitoba, with firm demand coming from the U.S., is continuing to provide some of the best cash basis opportunities in Western Canada. Alberta traditionally offers the best value, as it is closer to port locations, he said.
While record crushing and export demand have been supportive, increased chart-based buying in canola futures, has also added toward the upward price trend, he said. Speculative money that left a few months ago is returning to perk up bids, Jubinville said.
Continued bullish sentiment toward the global macroeconomic picture, along with the upward trend in soy complexes, has also added to the firmness in futures, he said. If risk sentiment in the energy, equity and metals markets continues, that will remain supportive toward canola cash bids, he said.
Current spot bids for canola are as high as $12.95 a bushel in Manitoba, $12.75 in Alberta, and $12.80 in Saskatchewan, according to Prairie Ag Hotwire data. That is up by anywhere from 86 cents to $1.01, compared to one month ago.
Meanwhile, new-crop canola bids have are coming in as high as $11.48 a bushel in Manitoba, $11.66 in Alberta and $11.53 in Saskatchewan, up between 58 and 73 cents from the previous month.
Some factors could undermine the long-term price potential, including ideas that current canola cash prices may be oversold and could be due for a correction.
Increased spring seeding estimates, projected between 19 million to 20 million acres, could also weigh on prices, Jubinville said.
The looming South American soybean crop, and uncertainty in global financial markets, could also limit the upside in canola bids, he said.