MarketsFarm — ICE canola futures climbed to fresh contract highs during the week ended Wednesday, as activity in outside markets and canola’s own tight supply situation provided support.
“Outside forces help it, but there are also things unique to the canola market that are supportive,” said David Derwin, commodities investment advisor with PI Financial in Winnipeg.
Chicago Board of Trade soyoil, Malaysian palm oil, European rapeseed and crude oil have all shown strength, providing spillover support for canola.
Many of those other commodities have outpaced canola to the upside, and Derwin noted canola crush margins have risen by more than $100 per tonne over the past month, making the Canadian oilseed more profitable to end users and contributing to the existing upward trend.
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While the trend may be higher for canola, Derwin noted the underlying environment is volatile. As a result, he recommended producers look into an options strategy in order to give some balance and manage production risk while still capturing the high prices.
Looking to the spring, high prices may encourage some more canola area in Western Canada. However, Derwin also pointed out many other crops also show promising returns, which may limit acreage adjustments.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
