Since September, January canola futures have rocketed from $355 to $396 per tonne, a “tremendous” upward movement, according to Xcan Grain Pool Inc. trader Joachim Toens.
“I think we have the potential of going up another $10, $15 (per tonne), although I think the air is getting very thin here,” he said last week, adding he wouldn’t be surprised to see prices drop somewhat.
Charlie Pearson, a Calgary-based analyst, said he thinks canola will struggle to break above the $400 per tonne mark, unless oil or meal prices rally, or the Canadian dollar moves lower.
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But at current levels, canola prices have firm support underneath them, Pearson added.
“I don’t think canola would come down very far before you would start attracting some more demand,” he said, noting farmers would be reluctant to sell canola at lower levels.
Paul Erickson, trader with Linnco Futures Group, said crushers have been buying November 1999 canola futures because of stronger margins for the new crop.
“We’ve seen some farmer hedging out there, but I wouldn’t advise putting any hedges in at the moment,” said Erickson.
One grain company has been bidding $9 per bushel for canola delivered in July 1999, but only $8 per bu. for November 1999.
Erickson said crop problems next summer could quickly bring November 1999 bids up to $10 per bu.
But Pearson said farmers are telling him they will push canola acres to the limit next spring because it has been profitable so far in 1998-99. This year, the industry will easily move seven to 7.5 million tonnes of canola.
If farmers appear to be prepared to add another million tonnes to the equation next year, “monster” supplies could pressure canola prices down near the end of the crop year, he said.
