CNS Canada –– Canola declined on the week with near-term pressure, but looking to the spring, the market may tighten as crops of seasons past haunt upcoming production.
Since last week, canola lost $5.70 per tonne in the May contract, closing at $527.20 on Wednesday.
The canola market declined with influence from Chicago Board of Trade (CBOT) soybeans, as Brazil’s large oilseed production weighed on prices in the U.S.
Though canola declined and technical factors have the potential to cause further downside, anticipated tight supplies in the spring are likely to keep prices afloat.
“I think there is some downward potential here near-term, because we’ve had an upswing, and we’ve turned and we’re on a downswing right now,” said Ken Ball of PI Financial Corp. in Winnipeg.
But as a large portion of Western Canada sits covered in snow, traders are looking to spring production.
The condition of canola left in fields to overwinter has yet to be determined, which will keep some support in the market.
“The way things are going, we’re likely not looking at an early spring,” Ball said.
That’ll create some issues with seeding new canola, throwing the total supply of the commodity into question. On the other side of the equation, demand is strong, Ball said.
“If we lose quite a bit of canola that is in the fields, we could be projecting to almost run out of canola by summer,” he said.
The market will work to prevent that by making canola more expensive, he added.
— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.