CNS Canada — Canola contracts on the ICE Futures Canada platform dropped sharply during the week ended Wednesday, falling below major support as some stops were hit on the way down.
While damage was done from a chart standpoint, end-user demand remains solid and “time will tell” if the downtrend continues or if canola manages to climb back into its previously well established range.
“The seasonal trend is generally for the (canola) futures to trade higher going forward, but that’s certainly not imminent as we’ll also take some cues from the soybean market,” said Jon Driedger of FarmLink Marketing.
The U.S. soy complex is looking “a little heavier,” he noted, due to good crop conditions in South America.
While futures moved lower during the week, basis levels in the countryside showed some improvement, which Driedger saw as a sign of the good exporter and domestic crusher demand.
The price break also caused some farmer selling to back away, he said.
“We have multiple moving parts, and whether that means we settle into a lower range, or if we just spike lower and then claw back higher, time will tell.”
Attention in the canola market is also starting to shift toward new-crop acreage ideas. Early expectations were generally calling for a five per cent increase in canola acres on the year, Driedger said.
The need to draw in acres, along with the uncertainty over new-crop production, was helping lend some extra support to the more deferred futures contracts.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.