Canola futures may soon be due for a seasonal turn higher as harvest pressure subsides and prices look more attractive to end users.
While the market trended lower over the summer, MarketsFarm analyst Mike Jubinville said he expects farmer deliveries to soon lighten up, with the lows possibly in place for the time being. He placed chart support in the November contract at C$760 to C$770/tonne, with the close back above $800 on Wednesday a bullish technical signal - if the market can hold above that point in subsequent sessions.
Higher canola prices in the spring led to some demand destruction and an eventual downturn in the futures in June, but Jubinville said the situation has corrected itself.
“We are price competitive internationally again,” he said, noting that China was already thought to be in the market buying Canadian canola with movement to the country likely to pick up over the next few months.
Meanwhile, domestic crush margins remain in the stratosphere. The crush margin for October delivery reported by ICE Futures came in at C$320/ tonne above the November contract as of Wednesday, well above average levels and up by over $100 in the past month.
“Crush margins are just so extraordinarily profitable for the crushers,” said Jubinville, adding “I’ve never seen anything like it.”
“Given crush margins the way they are, and given canola’s price relationship to other competing oilseeds, unless the world collapses it seems like there’s good support for canola.”
However, uncertain outside factors, including the ongoing conflict in Ukraine and recessionary concerns, are still expected to influence the overall direction of canola.
“The field certainly gets muddied by issues of geopolitics,” Jubinville said.
Source: DePutter Publishing Ltd.
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