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Speculative buying sees canola prices firm up

Winnipeg | CNS Canada – ICE Canada canola prices bounced around within a wide range during the week ended November 17, but finished on a firmer note as a rally in Chicago Board of Trade soybeans gave canola a boost.

Any strength was largely tied to chart-based speculative buying, with no real fresh fundamental news as far as canola is concerned. The harvest is largely complete across Western Canada, while the U.S. harvest is in its final stages.

Farmers were still making good deliveries into the commercial pipeline in the latest weekly data, and the ample nearby supplies should be keeping a bit of a lid on the market. While those off-the-combine deliveries will now be slowing down, end users are looking comfortable for the time being with little reason to bid up the market.

Producers delivered just under 400,000 tonnes of canola during the week ended November 12, taking visible stocks to 1.4 million tonnes, according to the latest Canadian Grain Commission data. Exports were off the record level posted the previous week, with adverse weather at the West Coast likely causing some delays.

Agriculture and Agri-Food Canada released updated supply/demand tables during the week, but left their projections for canola unchanged with a carryout of one million tonnes projected for 2017/18. That would compare with the 1.3 million tonnes carried forward from 2016/17. The one million tonne mark is considered a bit of a tipping point for canola, with anything below that considered tight. As a result, future adjustments to the supply/demand balance will be followed closely.

Statistics Canada releases its final survey-based production estimates of the year on December 6, which should provide a clearer picture on the available supplies for marketing this year.

Looking ahead, basis opportunities are a possibility, but the futures might just keep grinding along within their sideways range until a fresh spark comes to move values one way or the other.

In the U.S., soybeans and corn also saw some choppy activity during the week, with the bias pointed lower for the most part before Friday’s corrective bounce.

Corn futures touched fresh contract lows during the week, and could still have more room to the downside. However, about five to ten per cent of the U.S. corn crop is still waiting to be harvested, with quality and yield downgrades a possibility in some cases.

Soybeans hit their weakest levels in a month during the week, but bounced off of those lows as fund traders squared positions.

Attention in both markets is now shifting to South America, where weather conditions in Brazil and Argentina have the potential to pull prices one way or the other.

The U.S. Thanksgiving holiday takes place on Thursday, November 23, and U.S. markets will close early on Wednesday and only see sporadic activity on Friday as participants digest their turkey. The holiday trade could lead to some choppiness and price swings.

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