Ultimate magazine theme for WordPress.

ICE Weekly Outlook: Rapeseed still in range but upside possible

MarketsFarm – The ICE futures canola market traded within a range for the week ended Wednesday, but one trader believes large crush margins will push prices above psychological resistance levels.

Since nearly hitting $900/ton on Nov. 15, the January canola contract has declined for eight consecutive sessions before falling as low as $803.50/ton on Nov. 28. The price then recovered, but not as high as $850/ton.

While Chicago soybean fell three cents a pound in a half-hour on Nov. 30, holding back canola’s bullish move, soybean later recouped most of its losses in the session.

also read

CBOT Weekly Outlook: Circumstances could upset usual holiday doldrums

MarketsFarm – Normally this time of year, the Chicago Board of Trade (CBOT) slips on its vacation break, with…

“Canola is slowly starting to recover some of its value against oil and flour stocks,” said Ken Ball of Winnipeg-based PI Financial. “Crush spreads have been amazingly large … and ridiculously they have been[fueled]by speculative trading.”

According to ICE, January canola crush margin was $312.27 above futures on Tuesday — up $64.33 from the previous month and a jump of $34.31 from the previous week.

Ball added that canola failed to fall below $800/ton due to support from strong soybean oil prices, which then triggered a surge in canola to $850/ton.

“That’s going to be the range for now, but there’s room for (price) to fluctuate quite a bit because of the extreme moves in crush margins,” he said.

“It is entirely possible that over time these crush margins will return to normal levels. We expect crush margins to remain high.”

However, this will create a dilemma for the export market.

“If we want to export canola, it can’t trade relative to these oil and flour values, or Canadian canola becomes too expensive in world markets. As Australian canola begins to flush through the system over the next few months, canola margins should tighten back to more normal levels,” Ball said, adding that many end users of canola are both crushers and exporters.

“They would certainly much rather shred the rapeseed than export it. There would be a tendency to downplay exports and work on the crush. But we only have so much crush capacity, we still have to rely on export.”

Ball will also have an impact on canola prices going forward if soybean oil prices in Chicago continue to trade at higher levels relative to other vegetable oils.

This week, the U.S. Environmental Protection Agency (EPA) will announce its 2023 biofuel blending mandate, which could impact vegetable oil markets.

“There’s a lot of talk and talk about the blends for ethanol and biodiesel,” Ball said. “Soybean oil stocks are looking a bit tighter this year and that’s due to increased biofuel use. So they’re under pressure to slow that down a bit.”

— Adam Peleschaty Reports for MarketsFarm by Stonewall, Man.

Comments are closed.