CNS Canada –– ICE Futures Canada canola contracts moved higher during the week ended Wednesday, with the biggest gains in the front months. While the market ran into some resistance on Wednesday, there is still more room to the upside from both a chart and fundamental perspective.
“We’re still in an upward trend; we haven’t broken below any major moving averages,” said Jerry Klassen, manager of the Canadian office of Swiss-based GAP SA Grains and Products in Winnipeg.
In addition to those supportive technical signals, Klassen said the tightening old-crop supply situation and expectations for an acreage reduction this spring were also bullish influences in the background for canola.
“We’re looking for canola to divorce from beans,” said Klassen. “While the (U.S.) soybean carryout will be slightly above the 10-year average, the (Canadian) canola carryout will be below the 10-year average.”
Farmers are unlikely to be heavy sellers over the next two months, he added, as they focus on getting their crops in the ground.
“Without the farmer selling this crop… the demand is sufficient enough with the exports and domestic crush that you won’t see much slippage,” said Klassen.
From a chart standpoint, Klassen said two consecutive closes above $500 per tonne in the July contract “would be a very powerful technical indicator that there is solid demand underneath here.”
On the other side, he said, it would take a break below $480 to confirm that the rally was over.
July canola closed Wednesday at $498.70 per tonne.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.