ICE Futures Canada canola contracts moved higher during the week ended Aug. 21, seeing a further correction from the lows set earlier in the month as oversold price sentiment and gains in CBOT soybeans provided support.

Canadian harvest operations are starting to move forward, and the expectations for a large crop may limit the upside potential in canola in the near future, according to participants.

Statistics Canada pegged production at 14.7 million tonnes, which would be a new record and well above the 13.3 million-tonne crop grown in 2012. Average industry guesses on the size of the crop place it at over 15 million tonnes.

“Now we’ll be looking to the next few weeks of weather, and as long as the canola crop comes through without some distressing circumstances, like an early frost, we should have a 15 million (tonne)-plus crop,” said Mike Jubinville of ProFarmer Canada.

While Canadian harvest pressure has the potential to weigh on values, the market will take more direction from the U.S. soy complex than its own fundamentals, said Jon Driedger of FarmLink Marketing Solutions.

“We’ll take our cue from beans,” he said, adding that continued hot and dry weather in the U.S. — and the resulting reduction in yield potential — would be supportive for canola prices as well.

Soybeans, he said, were running into chart resistance at around US$13.30 per bushel in the November contract, and any speculative selling that materializes in the U.S. would also likely weigh on canola.

Overall, Driedger didn’t think there was much more room to the upside in canola, though he added weather conditions would remain an unpredictable wild card over the next several weeks.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.