ICE weekly outlook: Volatility to come for canola market

'Tighten up your seatbelt'

ICE November 2021 canola (candlesticks) with Bollinger (20,2) bands. (Barchart)

MarketsFarm — Record-breaking temperatures in British Columbia, lingering extreme heat in the Prairie provinces and little to no precipitation have strengthened an ongoing rally in the ICE Futures canola market.

One trader, however, warns that canola contracts may be in for a mercurial few weeks.

“We’re clearly in a weather market that is extremely volatile,” said Errol Anderson of Calgary-based ProMarket Communications. “With this extreme hot weather coming right at flowering, definitely we have yield damage.

“The market is starting to reflect that… It’s been quite explosive this week, but when we get explosiveness, we’ll also get selloffs as well.”

The vegetable oil market, which plays a major role in canola prices, has recently seen downward pressure, as weather conditions in the eastern U.S. Midwest have seen more moisture than in Western Canada.

On the other side, a weakening Canadian dollar has also brought support to canola.

As canola prices rise sharply, so too they can fall just as quickly, according to Anderson.

“If the canola market does relax, we’re going to see a selloff,” he said. “But, the unpredictability of this market is very, very difficult. Trying to predict day-to-day movement is extremely difficult.

“Tighten up your seatbelt. It’s going to be a wild one.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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