ICE weekly outlook: Canola’s uptrend intact for now

ICE July 2021 canola (candlesticks) with Bollinger (20,2) bands and November 2021 canola (black line). (Barchart)

MarketsFarm — The ICE Futures canola market continued its months-long upward trajectory during the week ended Wednesday, hitting fresh contract highs in many months as tight old-crop supplies and weather uncertainty for the new crop kept speculators on the buy side.

While selling was starting to come forward to temper gains in the new-crop months, the outlook for the old-crop months remains uncertain.

“We’re seeing some farmer selling activity for new-crop as targets continue to be hit,” Keith Ferley of RBC Dominion Securities said.

However, for the old crop, Ferley expected a lack of selling interest could keep prices underpinned.

“I don’t think anyone wants to go short this market, unless they have the product,” said Ferley on the strength in July canola.

Statistics Canada releases its stocks as of March 31 report on Friday (May 7). The report will likely show confirmation of the tightening stocks situation and was likely contributing to the nearby strength, according to Ferley.

Dryness across the Prairies was also supportive, although Ferley noted there was some rain in the forecast for Alberta while general seeding was also progressing.

As far as picking a top for the old-crop July contract, “at some point, the exporters will be out of the market,” said Ferley. Domestic crushers will also eventually turn their attention to pricing against the new-crop futures.

Palm oil values seasonally move lower at this time of year, which could also pressure values if end users look for alternative vegetable oils.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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