It's been a rather interesting ride for Winnipeg canola futures so far this spring - a winter rally peak at the beginning of March, then drops, rallies back into early April, then falls back again. And now, canola futures are powering back up to those same highs.
Where to next?
The current benchmark for canola July futures contract has, on three separate moves over the past two months, rallied into long-term overhead chart resistance in the $530 to $540 per tonne zone. That's major resistance which held this market in check for over two years on the weekly price chart.
What’s the rally driver?
There are a few factors at work, including a recent setback in the value of the Canadian dollar back below US0.78 cents, which helped somewhat revive canola crush margins. There's also talk of recent Chinese purchases of Canadian canola as a precaution against the possible implementation of tariffs against U.S. soybeans going into the Asian giant.
With the nearby May futures contract month closing in on expiry, traders are actively redeploying positions in the deferred July and even November contracts, adding to current futures trade volatility. Also, canola seasonal price trends tend to be positive this time year and, at the same time, the threat of a rail strike, while postponed over the past weekend, still overhangs the canola market.
Contract highs
Still, it is somewhat surprising to see canola futures holding at contract high territory despite a rolling lower in Chicago soybean futures and continued weakness across global vegetable oil markets. In fact, canola is looking rather expensive compared to competing oilseeds and products. Also, improving weather conditions across the Prairies suggests planting season will soon gain momentum in earnest.
Growers should respect cash pricing opportunities now bid up into the $11.50 to $12 per bushel region, depending on location.
Bottom line
The spring season lends itself to higher grain pricing opportunities, and that again appears to be the case right now for canola markets.
Source : FCC