Lack of fund buy-in supports sideways movement in canola market; Canadian dollar buoys wheat basis

With so much uncertainty in the major soybean markets, canola prices continue their sideways movement, largely because the big trading funds are simply staying out of the market for now.

Even if the U.S. and China resolve their trade issues, will we see a big uptick in the canola market? That remains to be seen, says Wendy White, manager of grain marketing for Viterra’s central region. “There’s still a bearish tone (to the market) with a lack of speculative funds coming to market,” she says.

The canola market is hovering around that $480 mark, a number that is either support or resistance, depending on how you look at it. White says that any optimism around U.S. trade talks seems tempered by two things: one, U.S. planting (and thus stock replenishing) is just around the corner, and, two, perhaps China has learned to live without U.S beans.

“Even if trade deals resolve, China has survived without U.S. beans, and now with African swine fever, could we see a long term change to soymeal demand out of China?” That question has canola prices sort of stuck at this point, she says.

The wheat market has a few other issues at play. Right now, basis levels are strong, largely because of a low Canadian dollar. Farmers can take advantage of this through locked in basis contracts with this U.S. exchange, a delivery period they want, and that gives them the ability to take advantage of any market moves to the plus side. All eyes are on the Black Sea region, for sure, White says, and with less market info than usual coming out of the U.S. because of the government shutdown, a little risk management can go far.

Hear more from Wendy White, below: 

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