(Resource News International) — ICE Futures Canada canola contracts dropped sharply lower this past week, setting fresh contract lows before seeing a modest correction.
The break lower, after holding steady for months, could set the stage for further technical weakness, but market participants said any downside may be limited.
Gord Wiesemann, senior market strategist with Lind Waldock, a division of MF Global, said the move to fresh contract lows in canola during the past week could set the stage for a move to the $360 per tonne range in the July contract.
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However, he said, the trend on the charts wasn’t strong enough to signal a large break lower.
“I don’t think there’s a great deal of downside in (canola) prices,” said Wiesemann. He said the market could be entering a “sleeper summer” from a technical standpoint, with any price direction likely coming from the shifting weather patterns.
“Prices will be in the hands of Mother Nature, who for now seems quite co-operative,” Wiesemann added.
Keith Ferley, a canola broker with RBC Dominion Securities, said psychological support for canola was now well below the market following the breakout of its long-term trading range during the past week.
However, he also said any further declines may be limited.
Ferley noted the recent declines was encouraging end-users to cover some of the business already on the books.
Also, he said, farmers have become reluctant sellers as the drier conditions across Western Canada allow them to return to spring seeding. That lack of selling could help exaggerate any correction higher if the canola market attempts to rally, he said.
