MarketsFarm — As the rally in canola on ICE Futures continued Wednesday, an analyst stressed it’s not when this upswing ends, but where.
David Derwin of PI Financial in Winnipeg spoke of when canola prices were falling, and they broke through that psychological barrier of $800 per tonne on their way down.
“That was the key area of support. That would be a natural place for these prices to migrate back to,” Derwin said, pointing at old- and new-crop contracts.
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“That would be a magnet to pull prices back up to those levels,” he added.
The current upswing in canola has largely been due to speculative funds looking to get out of enormous short positions they’ve built. Added to that, Derwin said there have been other factors influencing gains in the Canadian oilseed.
“We are entering what sometimes is a bit of a seasonally upward movement, he explained, noting this could last through April to June. Also, there’s been support from gains in the Chicago soy complex, European rapeseed and Malaysian palm oil.
“There’s room for these [canola] markets to move another $50 per tonne,” Derwin suggested.
He cautioned the overall trend is still to drift lower, but with fluctuations going up and down.
That said, he added, this is a good time for farmers to take advantage of canola prices and not to be complacent — and that farmers should add additional hedges and make more new-crop physical sales.
“The bottom line of it, is the risk is always to the downside for the farmers,” Derwin said.
— Glen Hallick reports for MarketsFarm from Winnipeg.
