MarketsFarm — ICE Futures canola contracts may soon be due for a seasonal turn higher as harvest pressure subsides and prices should be looking very attractive to end users.
However, uncertain outside influences will still dictate the overall direction.
“The field certainly gets muddied by issues of geopolitics,” said MarketsFarm analyst Mike Jubinville, pointing to the ongoing conflict in Ukraine as well as world recessionary concerns.
Looking specifically at canola, while the market has trended lower over the summer, he expected farmer deliveries would soon be lightening up with the lows possibly in place for the time being.
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“Crush margins are just so extraordinarily profitable for the crushers,” said Jubinville, adding “I’ve never seen anything like it.”
The crush margin for October delivery reported by ICE Futures came in at $320 per tonne above the November contract on Tuesday — well above average levels and up by over $100 per tonne over the past month.
Higher canola prices in the spring had led to some demand destruction and the eventual downturn in the futures in June, but Jubinville said the situation has corrected itself.
“We are price-competitive internationally again,” said Jubinville, noting China was already thought to be in the market buying Canadian canola, with movement to the country likely to pick up over the next few months.
“There’s good underlying support to the canola market,” said Jubinville. He placed chart support in the November contract at $760 to $770 per tonne, with the close back above $800 per tonne on Wednesday a bullish technical signal if the market can hold above that point in subsequent sessions.
“Given crush margins the way they are, and given canola’s price relationship to other competing oilseeds, unless the world collapses it seems like there’s good support for canola.”
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
