CNS Canada — ICE Futures Canada canola contracts traded within a wide range during the week ended Wednesday, but settled mixed as the market reacted to conflicting outside factors.
While the nearby bias has shifted lower in the most active months, ongoing production uncertainty in Western Canada should remain supportive in the long run, according to an analyst.
The November contract hit an intersession high of $539 per tonne last Friday (July 10), before drifting lower in subsequent sessions to settle at $524.60 per tonne on Wednesday.
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Fund traders and other speculators liquidating large long positions contributed to the move off the high, said analyst Wayne Palmer of Agri-Trend Marketing.
Palmer said there was still room to the downside in the near term, as fund traders had been holding a long position of over 50,000 contracts on which they could still book profits.
If CBOT soybeans move lower and there’s a threat of the November contract breaking below $500, “it could get ugly,” said Palmer, who added producers would also start “panic selling” if that were to happen.
While such a downturn is a possibility, Palmer also said persistent weather concerns in Western Canada and declining production prospects should be supportive in the long run, with the $550 per tonne level the next upside target.
“Our crop is getting smaller… there is a potential disaster in Western Canada,” said Palmer. However, he said, even with declining canola production prospects, the market will still need a push from soybeans to move to those new highs.
“You won’t see soybeans going down and canola going up,” he said, but “if beans start having pluses, you’ll see canola outrun soybeans to the upside.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
