Winnipeg (CNS Canada) – ICE Futures Canada canola contracts appear to have finally run into some resistance after trending higher for all of February. While a return higher is possible, canola will take most of its direction going forward from what happens in outside markets.
The May canola contract hit a three-month high of C$531 per tonne on March 5 after posting gains for 11 straight sessions. However, profit-taking weighed heavily the following two sessions, with the contract settling at C$522.20 per tonne on March 7.
That C$530 to C$531 per tonne level provided stiff resistance and brought in some selling pressure, according to Keith Ferley of RBC Dominion Securities. The recent strength in the futures also brought in more farmer hedges.
“Moisture conditions across Western Canada certainly improved a lot,” added Ferley, of RBC Dominion Securities on the recent snowfall across the Prairies which should boost prospects for the 2018 crop.
While the Canadian moisture situation is a key factor in the longer term, Ferley expected most of the nearby direction in the futures would continue to come from the Chicago Board of Trade soy complex.
Argentina’s weather is still dry, “that’s been the focus, and will remain the focus until we see some rain,” said Ferley. He said the United States Department of Agriculture’s monthly supply/demand report, set for release on March 8, also has the potential to move values one way or the other.
On the supportive side, “the Canadian dollar is trying to give us a little bit of support,” said Ferley. The currency lost roughly one cent relative to its U.S. counterpart over the course of the first week of March.