ICE weekly outlook: Weather trumps Trump on canola

(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts posted substantial gains during the week ended Wednesday, taking strength from a rally in the soy complex.

Both front-end contracts rose $17 on the week, with the March contract jumping from $498 at its Jan. 11 close to settle at $515 a week later.

Weather concerns in South America have been particularly bullish as of late, with excess rain in Argentina sparking ideas that soybean losses could hit 10 per cent or more in that country.

“The weather in Argentina will be watched closely,” said Jonathon Driedger of Farmlink Marketing Solutions in Winnipeg. “Going forward, it’s supposed to be a little drier with rains after that, so from a news perspective that will be the biggest driver.”

Demand for canola has remained steady with commercials taking advantage of healthy crush margins.

“We’re also starting to see basis levels improve in the country in a number of places,” said Driedger. “So maybe all that will help provide an underlying tone for canola specifically.”

The $500 mark is a firm support level right now, he said, despite the fact canola’s dominant contract was below that last week.

“Recent sentiment has helped pull us off that $500 level, so I would view that as solid support,” he said.

The pending inauguration of Donald Trump as U.S. president is an event most of North America will be monitoring Friday. Still, Driedger believes much of the uncertainty surrounding the unorthodox politician has already been baked into the market.

“Stock markets are still susceptible to an overreaction up or down, so a certain amount of that could spillover to grain markets,” he said.

Much of Trump’s recent influence has been on particular companies and currencies, he added.

“So it’s not the inauguration itself,” he said. “I think there is an element of trying to understand what that administration will look like.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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