Tight Canadian supplies have helped lift canola futures to near the top of a three-month trading range but more recent strength – and future market direction – may be more closely tied to the energy complex.
"There seems to be a mindset shift occurring here, and its making canola become a pure energy play," said analyst Mike Jubinville of MarketsFarm.
With crude oil, natural gas, and other energy markets seeing strength around the world, Jubinville said canola appears to be getting caught up in the updraft. As long as the bullish momentum is being maintained in the energy sector, it's hard to envision canola falling back in any sustained fashion, he added.
Rapeseed grown in Europe is a major feedstock for biodiesel production there, with rapeseed futures trading at record high levels. Jubinville expected activity in European rapeseed would be a key feature to watch in the Canadian canola market.
"(But) if we have a change in momentum in the energy sector, that will extinguish this current rally," he added.
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