CNS Canada — ICE Futures Canada canola contracts climbed to their highest levels in two years during the week ended Wednesday, with mounting weather concerns across the Prairies the key driver in the market.
“This thing will keep going until we get some rain,” said Jerry Klassen, manager of GAP S.A. Grains and Produits in Winnipeg.
The move above the psychological $500 per tonne level in the November contract was also bullish from a chart standpoint, he said, with the next upside targets coming in the $530-$540 area.
With yield prospects steadily declining, “the market needs to ration demand,” he added.
“This crop is getting smaller,” said Wayne Palmer, analyst with Agri-Trend Marketing. Yield losses were already a reality in the dry regions of Alberta and Saskatchewan, he said, while excessive moisture in parts of Manitoba was also cutting into production prospects.
However, Palmer noted funds are already holding a very large long position, and may be limited in how much more they can buy. Declining crush margins are already causing domestic processors to back away and reduce their capacity utilization as well.
As a result, he said, the market will likely need support from the CBOT soy complex to keep the rally going. A weaker Canadian dollar would also be supportive for canola.
Farmers are expected to remain reluctant sellers until they get a clearer picture of just how much canola they will have to move this year, said Palmer.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.