New-crop canola prices have also been trending higher over the past few months. After having traded at a slight discount to Nov 01 soybean values from October 2000 to December 2000, WCE Nov 01 canola futures have traded at a premium to CBOT soybean values (adjusted for currency) in recent months. The Nov 01 canola futures contract ended the month at roughly a Cdn$70.00/tonne premium to Nov 01 soybean values.
Trade sources indicated that the rally in canola prices has mainly been a result of weather conditions across Western Canada. Dry conditions in the main growing regions in Alberta and Saskatchewan are expected to remain a focal point among the trade over the next while. The Nov 01 new-crop canola contract witnessed very active trade in the month of July 2001, setting a new open interest record for the Nov 01 contract.
The Nov 01/Jan 02 spread has moved from showing approximately Cdn$6.00/tonne carry in mid-January 2001 to a $2.00/tonne premium (inverse) on July 26, 2001 in contrast to the prior two years. The Nov/Jan spread ended the month with the settlement prices showing $0.80/tonne carry, however, trade sources indicate this spread may continue to be inverted throughout the remainder of the growing season. Uncertainty regarding crop conditions through the remainder of the growing season (new crop availability) and a limited carry-out in canola stocks expected next year are both potential sources for additional price volatility in the coming months.
