MarketsFarm — The ICE Futures canola market was in freefall mode through the first half of March, hitting its weakest levels in over a year. While the losses may be looking overdone, the bottom remains to be seen.
“This has been a brutal drop in canola,” said Bruce Burnett, director of markets and weather with MarketsFarm.
“We have a lot of money playing around in canola right now,” he added, noting much of the latest weakness was tied to speculators adding to short positions.
Read Also
More canola, spring wheat likely to be seeded this spring
As spring planting approaches, farmers are busy planning which crops to seed this year and how much. With that, market thoughts have turned toward planted area projections, as Statistics Canada is set to issue its report on Thursday.
The latest Commitment of Traders data, as of Feb. 28, showed fund traders already heavily short at that time, with open interest rising to record levels over the past two weeks as canola futures lost roughly $75 per tonne.
“The funds are looking for things they think are overvalued, and they’ve determined that canola is overvalued,” Burnett said.
However, he noted, canola futures are now trading at a discount to Chicago soybeans, which would imply canola should be due for a correction as the Canadian oilseed typically trades at a premium.
From a chart standpoint, the May contract fell below several key support points during the latest selloff with the relative strength index showing a heavily oversold market.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
