Glacier FarmMedia — Rising crude oil and Chicago soyoil prices have pushed canola higher since the start of the war in Iran last month, with the May contract consistently trading above C$720 per tonne. Despite this, that contract was rangebound over the past week.
On April 1, profit-taking took May canola down C$13.30/tonne to close at C$718.50. However, it has still remained between C$710 to C$740 since March 24.
Phil Speiss from RBC Dominion Securities in Winnipeg said while canola prices have been in a bullish trend line over the past few months, fundamentals are leaning bearish due to large stocks and high acreage expectations this year.
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A canola contract closing below its 20-day average in two straight sessions is an indicator of a downturn, he added.
“That’s step one. Get a close below the trend line,” Speiss said. “If you can get (two closes below), well now you start talking maybe there’s a potential downside. You look at targets from previous days. On (March 23), we saw a low of C$708.70/tonne and (the week) before that, we saw C$700.60. Those would become targets on the downside.”
Canola prices are largely tied to crude oil and especially to Chicago soyoil, but Speiss said diesel and heating oil markets are also influencing the oilseed.
“(Heating oil) is the most firm out of the energy markets,” he said. “There is a connection there on the bio side of things … If you look at a heating oil chart, it’s going straight up. If you’re playing biofuel and you’re a speculator or large managed money and you see that play, you’re just feeding into that canola length.”
Canola crush margins are also remarkably strong with the May contract at C$333.64/tonne as of March 31, more than double from a year earlier (C$165.31). However, Speiss noted that margins are sure to come down soon.
“It’s parabolic,” he said. “We know the crush pace is the crush pace. We know that they’re full through summer. At some point, it’s just a number. From a futures perspective, we see crush demand getting pushed further and further out the curve: November, January 2027, March 2027 … (Crush margins) don’t play too much of a role anymore.”
As for where canola prices could go in the near future, Speiss said they’re as uncertain as the war itself.
“We’re so tied to the geopoliticals right now, it’s an impossibility,” he said. “If you want to bet on anything, the trend just stays intact until you break it.”
