ICE canola stuck in tug of war

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Published: February 28, 2013

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ICE Futures Canada canola contracts moved lower during the week ended Feb. 27, retreating from nearby highs as losses in Chicago soybeans spilled over to weigh on values.

However, canola did run into nearby support and remains range-bound overall, according to an analyst.

Canola has been stuck in a broad range over the past month, with expectations for a large South American soybean crop on the one side being countered by canola’s own tight supply situation, said analyst Jon Driedger of FarmLink Marketing Solutions in Winnipeg.

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"These two forces are pulling at (canola) in a bit of a tug of war," he said.

If soybeans see continued weakness, canola futures may move lower as well but what happens in basis levels will tell more about the specifics in the canola market, said Driedger.

Basis levels remain very strong, which was a sign that end-users continue to show good demand for canola, he said. At a certain point demand rationing will come forward, but he said there was no evidence of that occurring just yet.

Overall, Driedger expected to see some choppiness in the canola market "as we transition, and the South American (soybean) supplies become available."

After that, he said, attention will turn to spring seeding conditions in the U.S. and Canada.

From a chart perspective, the most active May canola contract traded within a wide range of $603.40 to $638.10 per tonne over the past week.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

About the author

Phil Franz-Warkentin

Phil Franz-Warkentin

Editor - Daily News

Phil Franz-Warkentin grew up on an acreage in southern Manitoba and has reported on agriculture for over 20 years. Based in Winnipeg, his writing has appeared in publications across Canada and internationally. Phil is a trusted voice on the Prairie radio waves providing daily futures market updates. In his spare time, Phil enjoys playing music and making art.

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