CNS Canada — ICE Futures Canada canola contracts suffered significant losses during a volatile week ended Wednesday.
While futures managed to recover off their fresh contract lows hit during the week, the overall technical bias remained pointed lower.
Weakness in the U.S. soy complex and vegetable oil market were joined by strength in the Canadian dollar, creating a vortex that pulled canola futures down by over $12 per tonne.
Speculative selling was also a key feature, with bears momentarily pushing the May contract to a contract low of $435.50 per tonne.
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Winnipeg-based trader Bill Craddock noted Wednesday’s May contract was mostly devoid of spreads which pointed towards heavy speculative action.
“Because all the concentration is in one month, it tells me there’s a lot of spec trade taking place, because the commercials would be spread out over different months and they would be doing more spreading,” he said.
On the positive side, traders bought back their positions at the end of Wednesday’s session, which took the market off its lows.
However, pressure from South America’s crop, slowly beginning to make its way to market, is expected to crowd canola at some point, according to reports.
Farmers are also continuing to unload some supplies, Craddock noted, citing statistics from the Canadian Grain Commission.
Deliveries reported by the CGC are “always around 300,000 tonnes a week, so it’s coming in on a steady basis,” he said.
Even the new crop, however, is down $50 per tonne from where it was not too long ago, he noted.
Key technical levels continue to fall, which makes it tough to pin down major support for canola going forward, he said.
“We said it was $440 (per tonne) yesterday and it just blew through that like it was nothing,” he said.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
