ICE weekly outlook: Canola waits for stocks report

CNS Canada — ICE Futures Canada canola contracts continue to chop around in the lead-up to the release of a major report.

Statistics Canada is due to release its estimates for the country’s canola stocks (as of March 31) on Friday.

The dominant July contract eked out a minor gain of $1.30 per tonne during the week ended Wednesday.

Over the past few months the market has enjoyed support from ideas that canola stocks are tightening across the Prairies.

However, one analyst said, that could change depending on what Statistics Canada finds.

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“We’ve known for a long time we will run out of canola if the numbers we’re working with are realistic,” said Ken Ball of PI Financial in Winnipeg.

“Is last year’s crop estimate accurate?” he added. “How much canola is left out in the field? We’re dealing with a lot of variables.”

The industry doesn’t seem to have a clear picture of what the stocks report will say Friday, he said.

“It’s insanely wide, you have guesses ranging from 4.8 million (tonnes) to 6.9 million, even 7.2 (million); that’s crazy, having differences of that amount.”

Unless the number is on the high side of expectations, he said, the industry will likely chew through existing supplies before the new crop hits the market.

“Last year we consumed 6.5 million tonnes and this year we’re consuming at a faster pace,” he said. “So if we only have 6.5 million tonnes then we are running out of canola.”

Currency issues are another feature to watch, according to Jonathon Driedger of FarmLink Marketing Solutions in Winnipeg.

“The (Canadian) dollar is grinding lower,” he said. “A penny and a half on the dollar could equal 10 bucks on the futures, so that has definitely helped.”

The November contract has particularly benefited from the movement in the dollar, he added.

A few weeks ago, Driedger thought the price of canola was a little low, but since then it has corrected to a more appropriate level, he said.

The industry may take steps if the amount of canola stocks is on the small side, he added.

“Are we going to start rationing demand?” he said. “There are multiple moving parts and I don’t know if one is going to drag us higher or lower.

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

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