ICE weekly outlook: Canola’s fate rests on fund buying

CNS Canada — ICE Futures Canada canola contracts moved higher during the week ended Wednesday, following strength in CBOT (Chicago Board of Trade) soybeans, but one analyst says it could be hard for the market to hold onto those advances.

CBOT soybeans rallied Tuesday after the U.S. Department of Agriculture released bullish supply and demand data, and aggressive fund-buying allowed sharp advances.

Canola gained $16.10 in the July contract since May 4, and $15.70 in the November contract, but whether they can keep those gains, or continue advancing, depends on fund activity continuing in U.S. markets, said Ken Ball of PI Financial Corp.

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“It’s a bit unpredictable whether or not those funds will continue to be aggressive,” he said. “At some point will they turn and start getting their money out of the market.”

Beyond that buying, he said, the soybean market has little in the way of fundamental support.

Odds are the canola market will start pulling back, Ball said, with the beginnings of a decline seen on Wednesday, when the market lost $15.10 in the July contract by close.

“The market has probably got a little bit overdone. Usually markets can’t do that for more than a few days before they have to fall back,” Ball said.

But he doesn’t expect the market to lose ground to any major extent, as it continues to be reasonably well-supported by weather concerns in Western Canada.

“There’s an uncertain situation in canola that everyone is just sort of watching,” Ball said.

Parts of Alberta are too dry, underpinning the market, but areas in Manitoba and Saskatchewan got beneficial rains Wednesday.

Several regions across the Prairies this week have frost in the forecast, on which traders are also keeping an eye.

Moves in the Canadian dollar will play a role in canola’s movement in future sessions. The loonie gained ground against its U.S. counterpart on Wednesday, but Ball said previous declines in the currency had allowed canola to advance on the week.

Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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