MarketsFarm — Action has begun somewhat sooner than expected for traders rolling out of the January canola contract on ICE Futures, according to trader Ken Ball of PI Financial in Winnipeg.
The main reasons are the massive size of the long position and tight supplies of canola. However, he wasn’t entirely sure if the price for January canola would begin to tumble.
“If everything else is staying firm, and you get that sell-off on days like today, you just might get a little bit weaker than the other stuff,” Ball said.
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On Wednesday, that January canola contract took a hit, losing $12.10 per tonne to close at a still hefty $1,003.70 per tonne.
“No one wants to be playing around with these contracts close to first notice,” Ball said, noting when that time does roll around, much of the activity will have moved on.
“There will be a camp of players on the long side that will want to stay in and force the remaining shorts into the last few days,” he said.
With such a tight supply situation, Ball pointed to the market being heavily slanted in favour of the longs when it comes to delivery situations.
“By the time we get to mid-December, we will have to see what’s there. Some longs will stand in there for delivery. The longs have lots of cash, the shorts will have to come up with canola,” he said.
As well, Ball said the January contract could ebb and flow much like the preceding November contract did before it wrapped up, pushing a little bit higher toward its final end. But with no open interest, he said that won’t matter too much.
“If [the January] goes up $100 that’s $100 times nothing. It doesn’t matter really, but you’ll get some games being played.”
— Glen Hallick reports for MarketsFarm from Winnipeg.
