CNS Canada — ICE Futures Canada canola prices edged up on the week, propped up by soggy Prairie fields and the anticipation for warm, dry weather in the U.S.
Going forward, the market will be dominated by fund trading and weather-watching.
“Funds are net short right now, and that’s something different, because we’ve rallied back up,” said Keith Ferley, commodity futures advisor at RBC Dominion Securities in Winnipeg.
That could set the market up for extended gains, if canola continues to hold strength.
Funds would likely prop up prices around $495 per tonne, Ferley said.
Canola ended at $482.20 in the November contract on Wednesday, after gaining $2.40 on the week.
If the market starts to lose ground with dissipating weather concerns, traders could take prices the other way.
“If we continue to rally, then the funds are going to get out of those shorts, if we start to fade or drift back down, then we could back down and test recent lows,” Ferley said.
Generally, crops in Western Canada are in good condition, but certain areas of Manitoba and Saskatchewan are keeping a weather premium in the market.
Temperatures have remained about seasonal to below-seasonal, supporting canola production, Ferley said.
However, excess rain has caused pooling and standing water in some fields, which will likely cause crop loss.
“The drying trend is needed, and so if we don’t get it, that could hamper crop production in the next little while,” Ferley said.
Many key growing areas in Manitoba are expected to see sunnier conditions into next week, while rain could continue in areas in Saskatchewan, Environment Canada forecasts show.
Traders are also watching the weather to the south, as warm, dry conditions develop in the U.S. Midwest.
“U.S. weather seems to be the driving factor right now, and will likely be the factor for the next month or so,” he said. “It’s such a key month for the U.S. beans.”
— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.