ICE weekly outlook: Canola seeks support amid bearish signals

CNS Canada –– ICE Futures Canada canola contracts appear to be tilting to the downside as they enter the Easter break, and will likely need support from a key U.S. government report if they want to stay in their current range.

At 11 a.m. CT, Thursday, the U.S. Department of Agriculture is scheduled to release its acreage intentions and grain stocks report.

According to Mike Jubinville of ProFarmer Canada, the report is likely to contain bearish information for the canola market.

“Record soybean acreage, increasing quarterly stocks info and soybeans exports that are running behind what the USDA had projected,” he explained.

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The canola market touched the top end of its range just two to three weeks ago, he noted, and there doesn’t appear to be a catalyst to move it higher.

Tomorrow is also on the eve of the Easter long weekend as well as the month itself, he added. What’s more, it is also the end of the quarter, which means speculators will want to take losing positions off their books.

“They don’t want them to be seen by the shareholders,” he said.

A lot of old-crop canola still needs to be sold, he said, and recent snow cover across the Prairies has raised hopes for better moisture conditions in the spring.

“The fall of the Canadian dollar has also helped make crush margins look more attractive and attracted some exporter interest,” he said.

The short-term story in Argentina appears to have been told, Jubinville said, and traders are shifting their attention to North America.

Meantime, a trader in Winnipeg said he thinks some upside could come from the trade tension between the U.S. and China.

“It seemed to spur some demand in the short-term anyway,” said Keith Ferley of RBC Dominion Securities in Winnipeg, referring to the U.S. decision to impose tariffs on steel and aluminum imports.

Canola exports to China have also been on the rise, he added.

“March was pretty good for export sales,” he said. “Quite a few cargoes went to China, which is adding to momentum.”

Rail car activity is also improving for grain shipments in Canada, which is a relief, he said.

“We’re hearing things have improved from some brutal levels back in January and February as far as car movements go.”

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow CNS at @CNSCanada on Twitter.

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