(Resource News International) — Canola cash bids are topping the key $10 per bushel level in many locations across Western Canada and could remain firm through the summer as long as outside financial markets co-operate, according to an analyst.
“There is so much uncertainty right now that we should be fairly well supported into the harvest period,” said Errol Anderson, president of ProMarket Communications in Calgary.
However, in addition to the weather-related uncertainty propping up canola prices, some of the recent strength in the commodity has also been encouraged by gains in the outside equity markets.
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The risk now, he said, was that if equities turn lower, commodities, including canola, would also weaken. “We should stay well supported, barring a fallout in the financial world,” said Anderson.
Basis levels, he said, would adjust for any equity-related movements in the futures to some degree, “but they can’t do the whole thing.”
With many growers holding onto a “$10 or bust” pricing idea, Anderson said any buyers who require the seed will need to come out with premiums in order to encourage farmer selling.
Anderson was also of the opinion that the Canadian dollar could weaken, which would be supportive for canola prices. Bullish technical signals in the futures may also translate into stronger cash bids if the November contract manages to break above $440, said Anderson.
On the other side of the market, forecasts calling for record-large U.S. soybean ending stocks for 2010-11 should limit the upside potential in canola prices, according to Anderson.
Canola spot bids are currently topping out at $10.09 per bushel in Alberta, $10 per bushel in Saskatchewan and $9.75 per bushel in Manitoba, according to the latest Prairie Ag Hotwire data. Those prices have all improved by more than a dollar per bushel over the past month.
