MarketsFarm — Early gains were followed by late losses on ICE Futures’ canola market during the week ended Wednesday.
The November canola contract began the week at $704.60 per tonne before rising up to $725.80/tonne on Monday, then ending the week at $711.70. The January contract went in similar directions, starting at $710.10/tonne before moving up to $731.20 on Monday and later finishing the week at $718.70.
Ken Ball, trader at PI Financial in Winnipeg, blamed “aggressive manipulation” by traders in canola for the oilseed’s recent price movement.
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“There was really nothing fundamental about canola. Crush margins came down very hard for a few weeks and canola was trading much stronger. While (soyoil) was going down, canola held firm. Soyoil is now starting to come up and canola’s trading much weaker. It’s been the pattern for canola all year long,” Ball said.
“Canola looks like it has a low in place and there should be some upside as long as the soy market’s going to hang firm.”
Rising soymeal prices and falling soyoil prices should cancel each other out in the long-term, according to Ball. But tightening supplies for the latter, barring a massive improvement in South American soybean crop conditions over the next few weeks, could give canola prices a boost.
“The spreaders are interactively gyrating around the margins,” he said. “Soyoil stocks are tightening up very rapidly with month after month of all-time biofuel usage…There’s a good chance soyoil is going to remain very strong here and canola will get pulled higher.”
Export demand for crops tend to ramp up during times of crisis, such as ongoing conflicts in the Gaza Strip and Ukraine, according to Ball. While he isn’t quite sure where canola prices could go over the next two weeks, he anticipates a bounce in the near future.
“A routine bounce in canola can get into that $750-$760/tonne range for the November or January contracts,” Ball explained. “Longer-term, if the soyoil stocks continue to tighten at such an aggressive pace, the game could change very rapidly if they don’t slow down biofuel usage, because stocks could get critically tight.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
