CNS Canada — It’s the time of year when canola prices closely follow the weather, and while recent rain has caused some losses, the market could hold onto its premium.
“In some ways you could say it’s a classic weather market,” said Jon Driedger, senior market analyst at FarmLink Marketing.
Prices had gained following dryness in Western Canada.
And while recent showers have pressured prices, they aren’t enough to completely ease traders’ concern about the upcoming crop, which is likely to keep some support in the market.
“Some areas got really good rain, some areas got a trace, and other places got missed more-or-less altogether,” he said.
Rain in the Prairies has been a near-term bearish factor, but Driedger said the dryness had already taken its toll in some areas.
“I think in terms of a bin-busting yield, I think that’s off the table.”
The canola market is especially sensitive to those potential losses, he said, as supplies were tight going into the growing season.
While the supply fundamentals remain somewhat supportive, Driedger said weather is likely to rule how the market moves, which could add an element of unpredictability into trade.
“We’re in a critical window with this canola, and so the next couple weeks with the weather and the forecast, is really going to be important.”
Since last week, November canola advanced about $3 per tonne, ending at $514 on Wednesday.
Other factors traders will be watching include movement in the Canadian dollar and key technical areas.
The loonie gained more than a cent against its U.S. counterpart on Wednesday, after the Bank of Canada announced it would be raising interest rates. If that strength continues it could be bearish for canola.
— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.