Commodity News Service Canada — ICE Futures Canada canola contracts moved sharply lower during the week ended July 29, and more downside is possible for the market in coming weeks.
“I think we’re going into a period where we’re going to make some pre-harvest lows here,” said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.
“It looks like commercial stocks are sufficient to cover the nearby domestic and export demand and it looks like we’re not really seeing a lot of fresh export business step forward here,” he added.
Export buyers are moving to the sidelines as they wait for more clarity on the upcoming canola crop, as there is a wide variety of production estimates floating around.
“The range is probably 12.5 million tonnes to 14.5 million tonnes,” Klassen said. “I think that there’s still an idea that the acreage is actually larger than what StatsCan said, and we’ll also have to get a better handle on yields.”
Weakness in outside vegetable oil markets will also likely keep the canola market under pressure in the coming weeks, with futures expected to find major support at the $480.00 per tonne level, according to Klassen.
If the futures break below the $480.00 per tonne support, the next downside target will be the psychological level of $450.00, he added.
Farmer selling at harvest is expected to be heavy for canola as well, which should put further downward pressure on the market later this summer.
“With spring wheat prices being so weak here, canola is going to be used as a cash crop this year,” said Klassen. “Even if we have a smaller crop size, I think the farmers are going to be selling at harvest very aggressively because the other commodity prices are quite soft. Canola is still at $10.00 to $11.00 per bushel, and that’s a very good price.”
Some of the earliest canola harvesting should begin around the third week of August, with activities expected to be in full swing by the end of the month, he added.