ICE weekly outlook: March canola contract not quite out of game

ICE March 2021 canola with 20- and 50-day moving averages and CBOT May 2021 soybean oil (dark green line). (Barchart)

MarketsFarm — ICE Futures’ March canola contract doesn’t have too much to do with the price of the Canadian oilseed directly now but still can influence prices in coming days, according to Keith Ferley of RBC Dominion Securities in Winnipeg.

Open interest in the March contract was around 15,000 as of Feb. 17. Ferley noted 13,000 calls “that are in the money [and] have face value, some of them significantly.” He suggested two scenarios as to what could happen when the March expires.

“When those guys go to take their profits, does that pressure the futures, or are they going to roll those March positions into May?”

There could be some fireworks, he said, when a good chunk of the March ceases to trade on Friday. Officially, the contract doesn’t expire until Mar. 15, but volumes will steadily decline after this week.

Another factor in canola futures’ future will be the U.S. Department of Agriculture outlook conference. which runs Thursday and Friday. Average trade guesses peg planted acres for U.S. soybeans, corn and wheat to increase this year.

The range of those estimates for soybeans is 87 million to 92 million acres, for an average of 89.8 million, according to reports. U.S. soybean acres in 2020 came to 83.1 million.

Predictions for planted corn acres are from 91.5 million to 96 million, for an average of 92.9 million. In 2020, U.S. farmers planted 90.8 million acres of corn.

As for wheat, market expectations on average call for 45.3 million acres in 2021, up one million from last year’s seeded U.S. acres.

“That’s going to give new-crop [soybeans, corn and wheat] some direction,” Ferley said.

“Indirectly, canola will watch to see what they U.S. farmer is going to do and what the Canadian farmer is going to do,” he added, noting the results could provide farmers with more crop rotation options.

— Glen Hallick reports for MarketsFarm from Winnipeg.



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