Glacier FarmMedia | MarketsFarm — Without the Chinese market, it’s only a matter of time before canola futures are poised to break below C$600 per tonne in its November contract, said Phil Speiss, trader with RBC Dominion Securities in Winnipeg.
Speiss termed the situation the Chicago soy complex and canola are in as a “lack of bullishness.”
“How do you rally a market that has no China? It’s impossible,” he said.
With the ongoing trade spat between China and the United States plus the former’s tariffs on Canadian canola seed, oil and meal, there won’t be a lot of exports from North America to China. Especially with China turning more towards purchases from Brazil for its oilseed needs, Speiss said.
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He said the U.S. cannot rely on other customers to fill the gap and the coming soybean harvest will add more pressure on the soy complex.
Canola, soybean harvests
Added to that, is the Canadian canola harvest getting underway, bringing additional weight on its values and the start of the U.S. soybean harvest not too far away.
“The seasonal downward swing. When we were at C$680, we feared it going under C$600 with the China news,” Speiss said.
“We need value buyers to step up,” he continued. “The problem is, without China, they can wait and that’s what we are seeing.”
Speiss said he expects canola to drop to C$580, its low from last year and a spot where a floor can firm up.
“Then we’ve pushed the market low enough to start finding that demand,” he said.
Spec funds
The trader also said the speculative funds are “whittling down” their long positions and are set to go short, perhaps by the end of the first week of September.
With the combination of weak export demand, the forthcoming oilseed harvest, and the specs going short, Speiss said there’s not much to prop up canola or soy.
