CNS Canada –– ICE Futures Canada canola futures chopped around within a narrow range during the week ending Wednesday, but were lower overall as declines in soybeans and Canada’s own ongoing logistics issues weighed on prices.
From a chart perspective, CBOT (Chicago Board of Trade) soybeans were nearing trendline support, and a move lower there could spill into canola as well, said Mike Jubinville of ProFarmer Canada.
March canola was “trying to hold a line” at contract lows of about C$420 per tonne, he added, but weekly charts would point to a next line of support at C$375-$380 per tonne.
Aside from the technicals, canola is already very cheap compared to other oilseeds, which would typically support prices and lead to increased export demand, said Jubinville.
However, the market is unable to take advantage of any additional opportunities “because we don’t have the logistical capabilities to pull it off right now,” he said.
“The job of the futures market is to find the balance point between buyers and sellers, but if you can’t actually move the product, what’s the use of the futures?”
Jubinville expected the market would remain volatile until the logistical issues slowing grain movement out of Western Canada are eventually resolved.
“We’re getting burned on ends here,” he said, adding “we have basis that’s deteriorating in the interior, widening out (above the futures) at the ports to discourage business, and yet we have all of this canola sitting around the country ready to go… I’ve never seen anything quite like this.”
Usually when the basis at the ports widens out above the futures it’s seen as a sign that buyers want canola and will pay any price, said Jubinville, but in the current situation it’s a sign that the grain companies are trying to discourage offshore buyers because they aren’t sure when they’ll have sufficient supplies to do the business.
Jubinville expected the logistic issues would resolve themselves over time, with a narrowing-in of basis levels likely the first sign that the grain companies are becoming more comfortable about being able to meet sales commitments.
– Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.