Canola prices aren’t hanging out with the rest of the gang.
Other crop prices fell in recent weeks, but canola remained strong, even after a bearish Statistics Canada report released last week.
Canola futures dipped less than two percent after the agency increased its crop estimate by 622,000 tonnes.
The muted reaction is a sign of a robust market, analysts say.
“It’s really a demand driven market,” said Errol Anderson of Pro Market Communications in Calgary.
“That’s probably the healthiest bull market you can have, when it’s not speculative driven but pure, old end-user demand.”
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U.S. wheat futures were the first to begin slipping in October and corn and soybeans appeared to peak in late November.
But canola has been a tough nut for the market to crack. Winnipeg Commodity Exchange canola futures rose through November, stopped in the days before the Statistics Canada report, dipped on the report and then recovered.
Strong commercial hedging helped support canola.
“The market in the last week has been extremely sturdy,” said Ken Ball of Union Securities in Winnipeg.
“There have been firm commercial bids under the market all the time.”
Ball and Anderson expect strong canola prices through the winter. Anderson foresees a $400 to $420 range to appear in the coldest months, but both say a slight decline is possible in the next few weeks.
Ball noted there is much more speculative money in the commodity markets than in past years, and speculators often take their money off the table during the Christmas holidays when they aren’t paying attention to the markets.
The report of Canada’s increase in canola supply might also encourage some long position holders to sell more than they otherwise planned.
“Even though we didn’t get an immediate reaction, it might increase the propensity of some speculative longs to cash in here as we head into Christmas,” said Ball.
Anderson said canola prices have also benefited from Australia’s drought, which left most of the world market to Canada.
“With Australia out of the market, it really solidifies our advantage in the world market. It’s really, really noticeable,” said Anderson.
In the short term, he wouldn’t be surprised by a $10 per tonne drop in canola futures prices, but that does not signal a need for action.
The winter will offer rewards to those who wait to sell.
“I think in the next four to six weeks the grower can afford to wait,” he said.”There’s very little downside.”
