CNS Canada –– ICE Futures Canada canola contracts dropped sharply in the most active months during the week ended Wednesday, as a selloff in the U.S. soy complex spilled over to weigh on values.
Expectations for continued weakness in soybeans should remain bearish for canola overall, but mounting weather concerns across the Prairies will help the Canadian futures see some relative strength compared to their U.S. counterparts.
Heavy rains flooded fields and caused damage across large portions of Manitoba and Saskatchewan, with the impact on price now dependent on assessments over the next week. [Related story]
“We know (the damage) is significant, but it’s hard to put a number on it right now,” said Ken Ball of PI Financial in Winnipeg.
“If it’s a 10 per cent loss, canola will weaken; if it’s 15, supplies are probably still comfortable; if it’s 20, we have problems,” said Ball.
He estimated up to 30 per cent of the crop was in questionable shape, but the actual crop losses still remain to be seen.
Domestic crushers and exporters will provide some scale-down support, as the declining crop prospects should see them looking to secure some coverage, said Ball.
Soybeans will keep drifting lower, with a move towards $10 per bushel in the November contract a possibility, unless a weather scare materializes, said Ball.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.