Winnipeg,(MarketsFarm)– A sharp drop in the Canadian dollar helped lessen the blow of the COVID-19 pandemic on the ICE canola market, with volatility and uncertainty expected to be the feature in the upcoming weeks.
Any strength in canola “is 100 per cent the Canadian dollar and nothing else,” said Ken Ball, of PI Financial in Winnipeg. “There’s no buying going on in canola outside of that,” he added.
The Canadian dollar dropped below 69 U.S. cents on March 18 to trade at levels not seen since 2003, as currency traders bailed out of most markets in favour of the perceived safe-haven United States dollar.
While the weaker Canadian dollar was supportive on paper, it only provides so much support in reality as commercial traders usually have currency rates locked in already, said Ball.
“The odds (of the grain markets) going anywhere in this environment are extremely small,” said Ball.
He expected see more volatility in the canola market as trade thins out and investors move to the sidelines to await developments in the COVID-19 situation.
The May canola contract settled at C$457.40 per tonne on March 18, which was about C$13 off of the contract low hit only two days earlier.