CNS Canada — ICE Futures Canada canola futures moved slightly lower during the week ended Wednesday, as a large sell-off in wheat and favourable weather conditions pressured canola values.
While canola is looking oversold on the charts, any corrective bounce may be short-lived, according to an analyst.
“Canola is technically oversold but we don’t have a reason to rebound very much,” said Errol Anderson of Pro Market Communications in Calgary. If prices do rebound, he said, it will likely be short-lived as the market has been “technically damaged” because there’s no shortage of product.
“We are also coming to the time of year when crushers shut down for maintenance,” he noted, adding that with a surplus already in the bin it could make for a rocky year-end.
In addition to the spill-over pressure from wheat, Anderson said he expects U.S. corn and soybeans to also keep moving lower.
Canola is caught in the crossfire of this pressure, he said, and while a rebound was felt on Wednesday, a lower-trading window is inevitable. Between now and the end of the crop year, he added, it will be difficult to reverse the downward momentum.
“If we get some fresh, bullish news weather-wise, we could get some (speculators) back in the market to drive things back up, but right now we’re not seeing that.”
Old-crop soybean supplies are tight right now, he said, but markets will see a more ample supply of beans in a few weeks, which will also impact canola.
Anderson said specs are also “gun-shy” and need something to help get some enthusiasm back into the market.
One feature of the low prices is the drawing card it offers to bargain hunters, but their overall impact will be muted, he said.
Another factor to watch is the weakening impact of Malaysian palm oil. The price has been coming down steadily as of late, Anderson said, and he’s not sure when it will improve significantly.
“Right now the bears have control.”
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.