ICE Futures Canada canola contracts have moved lower over the past week, as a strong Canadian dollar and improving crop prospects in Western Canada weighed on values. Barring a fresh weather scare or significant activity in outside markets the seasonal trend is expected to remain lower in canola heading through the summer.
“I think the trend will be a ‘slow grind lower,'” said Jerry Klassen, manager of GAP S.A. Grains and Products in Winnipeg. He said a large portion of the fall end-user demand was already covered, with any additional demand still to come forward waiting for a better handle on actual production.
While unplanted acres and excessive moisture in the eastern Prairies caused some concern early in the growing season, those concerns are long priced into the futures and the crops in Alberta and west-central Saskatchewan are looking okay, according to market participants.
Activity in outside markets could spill-over to dictate some of the activity in canola, but Klassen said canola itself was generally passed the stage of seeing another weather-related rally.
A lack of significant demand due to seasonal issues should also limit the nearby upside in canola. “Crushers are starting to take some downtime for upgrades and maintenance,” said Klassen. In addition, farmer deliveries are picking up now that the crops are a little more established.
From a technical standpoint, Klassen placed nearby support in the November canola contract at $550 per tonne. “If we break through there, I think the market can ultimately test the C$510 area heading into harvest,” he added.
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