Canola backs away from lofty heights

WINNIPEG (CNS) – It was a busy week for canola contracts on the ICE Futures Complex as the most-active July contract rocked and rolled between C$530 to C$540 per tonne before ultimate settling at the C$528 mark on April 11.

The last time the dominant canola contract was above the C$535 mark was in November of last year.

Commercial interest, the faltering soybean crop in South America and speculative buying were some of the key factors propping up the market.

As well, one market analyst in Winnipeg said last week’s USDA report also provided a spark.

“There was momentum (given to canola) from the last USDA report,” said Jonathon Driedger of FarmLink Marketing Solutions in Winnipeg.

The agency released its supply and demand estimates on Wednesday, April 3. In the reports, the agency forecast a drop in U.S. ending stocks by five million tonnes, which lent support to canola.

However, the rapidly rising Canadian dollar has provided some resistance to canola, as it makes the commodity less attractive to international buyers.

Driedger says contracts are running into technical resistance as well.

“We’re pushing into some levels that (on old crop contracts) that have shown pretty strong resistance in the past,” he noted.

Exports are also moving slower than last year, according to Ken Ball of PI Financial, also in Winnipeg.

He says that has prompted speculators to trade a lot of spreads.

“Speculative spreaders are pushing long canola, short soyoil spreads pretty heavily,” he said.

Crush margins have been near their lowest levels this season as a result of the Canadian dollar/soyoil activity.

When it comes to weather, most farmers want to see some warmer air move in soon.

“I don’t think anyone is panicking,” said Driedger. “But if it stays cold then the level of nervousness may creep higher.”

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