MarketsFarm — A speculative selloff weighed heavily on the ICE Futures canola market during the week ended Wednesday, before the selling subsided and prices regained much of their lost ground.
“For prices this high, that’s pretty routine stuff,” said Ken Ball of PI Financial in Winnipeg on the $80 per tonne drop in the nearby March contract and subsequent $40 bounce off of the lows.
He expected canola may not have much more room to go higher in the current environment, with speculative positioning within a wide $60-$70 per tonne range likely to be the feature over the next few months.
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“Unless we get an explosion in the soy market, old-crop canola is likely pushing the upper limits of its range,” Ball said, adding that while new highs are unlikely, “speculators can still jam it up and down.”
With North America still some time away from seeding its 2022 crop, attention in the market is focused on South American production. Recent rains have helped alleviate some of the dryness concerns in Argentina and Brazil, but “there’s still some nervousness about South America in the air,” said Ball.
Ongoing strength in Malaysian palm oil, which was trading at fresh highs this week, was also supportive for vegetable oil markets in general.
Activity in new-crop canola contracts has been much more subdued, with prices described as “comfortably valued” by Ball.
Looking ahead, “even if we have a good crop next year, supplies will still be tight,” said Ball, noting that even with a bumper crop, new-crop prices will need to stay historically strong.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.