Old/new-crop canola spread to widen further

frank

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ICE Futures Canada canola contracts have climbed higher in recent days, with the old-crop months posting the largest gains.

The spread between the old- and new-crop contracts is expected to continue to widen, as tightening old-crop supplies will be countered by expectations for record production in 2012.

As of the close of trade on April 25, the July 2011 canola contract was sitting at $630 per tonne, which was $47.90 above the new-crop November contract currently sitting at $582.10. A week ago that spread was at $38.40 per tonne.

Ken Ball of Union Securities in Winnipeg said most of the strength in the front months was tied to fund traders holding large long positions, pressuring the shorts to cover ahead of deliveries on the May contract.

With physical supplies on the tight side, the traders holding short positions don't want to be forced to deliver and are being forced to exit the market.

That short-covering activity could see the two front months challenge the $700 per tonne level before all is said and done, according to Ball.

Read more at http://www.albertafarmexpress.ca/news/old-new-crop-canola-spread-to-widen-further/1001103358/
 
 
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