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ICE weekly outlook: Canola values steady after losses

Weaker loonie supportive for canola

MarketsFarm — Canola prices started the week plagued by reports of the rapidly-spreading coronavirus in China, but managed to shake off some of that resistance.

At midweek, nearby ICE Futures canola contracts were between $461 and $470, after falling by over $8 on Monday.

Crush margins have maintained strength, which supported canola values. Crush margins were up by $5 on the week, remaining around $100 above the March contract. That’s slightly more conservative than crush margin values at the end of 2019, but still almost twice as high as the same time last year.

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High carryout stocks from the 2019-20 growing year are expected to put pressure on new crop prices, as indicated by the widening spread between the July and November canola contracts.

“The fact that we have July trading $8.50 under November is, in itself, bearish to the market,” one analyst said.

Relative weakness to the Canadian dollar has provided support to canola prices. After maintaining around 76.5 U.S. cents for most of January, the dollar was around 75.78 cents at midweek.

China’s outbreak of a coronavirus has cast a pall over financial markets, calling future demand levels into question. That has let an “underlying negative tone” into canola markets, according to Keith Ferley of RBC Dominion Securities in Winnipeg.

“Hopefully the fundamentals in the marketplace kick back in as fears of the virus subside,” he said.

— Marlo Glass reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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