Glacier FarmMedia | MarketsFarm — The ICE Futures canola market fell sharply lower during the week ended Dec. 18, as bearish technical signals and losses in the Chicago soy complex weighed on values.
Canola is facing a potentially tight supply situation, and demand rationing will be necessary going forward as the current usage pace is unsustainable. However, the Canadian oilseed is caught up in the general bearishness in soyoil and soybeans.
“Canola is doing very well in the face of it,” said Ken Ball of Ventum Financial in Winnipeg, adding that while supplies may be tight, if soyoil goes lower so will canola.
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He tied the weakness in soybeans and soyoil to the uncertainty in the United States biofuel sector. An updated U.S. spending bill provided no support for renewable diesel and caused industry participants to dump hedges in soyoil.
“If they knock 20 per cent off the biofuel usage, we’ll just swamp the North American market with soyoil,” said Ball.
In a normal market situation without the disruption caused by the U.S. biofuel situation, Ball said canola could be expected to move higher. However, without more clarity on U.S. policy, he expected the best hope was for prices to drift lower at a slower pace than the soy complex.
