Canola futures on the ICE Futures Canada trading platform moved sharply lower during the week ended July 24.
The November contract broke through the key support level of C$520 per tonne during the week, and is moving its way down toward the psychological support level of $500 per tonne. On July 24, the November canola contract settled at $505.20 per tonne, down from the close of $527.40 a week prior.
The move below $520 per tonne trigged technical-based selling and long liquidation by a variety of market players, which contributed to some of the sharp declines seen during the reporting period.
Some of the weakness in the market was also linked to spill-over pressure from the sharp losses seen in outside vegetable oil markets, including Malaysian palm oil and Chicago soyoil, said Jerry Klassen, manager of GAP Grains and Produits in Winnipeg.
Chicago soyoil futures were reported to be hovering around new contract lows, while Malaysian palm oil futures moved to fresh five-year lows during the week, brokers said.
Reports that growing conditions have been mostly ideal for western Canada’s canola crops were also bearish for prices.
Going forward, forecasts show that weather should continue to be non-threatening for Canadian canola crops, which could in turn put further downward pressure on the market.
Klassen noted that two different things could happen if the November contract hits the key support level of $500 per tonne.
“The market will likely correct in time or in price,” said Klassen. “So, we could see the market consolidate sideways for a week or so, or we could have a light bounce.”
And, if the market fails to hold above the $500 per tonne level, Klassen expects new support will be found around $450 per tonne.