CNS Canada — ICE Futures Canada canola contracts saw a bit of a corrective bounce on Wednesday but their overall trend remains pointed lower, with the winter highs possibly in for now, according to an analyst.
“The technical and the fundamentals are pointing down,” said Errol Anderson of Pro Market Communications in Calgary, pointing to the weakening palm oil market, large South American soybean crops and mounting trade tensions between the U.S. and China.
“It’s possible we’ll break below $500 again” in the March contract, and the next downside target comes in at around $490 per tonne, he said.
The March contract last traded below that psychological point on Jan. 16, then climbed sharply for a little more than a week to hit high a high of $525.30 on Jan. 24.
“We had a nice recovery over the past month, led by managed fund money in the soy complex,” he said, and “canola drafted off of that.”
With soybeans now turning lower, “I think we’ve seen the winter high in canola,” he said.
Attention will soon turn to North American spring seeding conditions. Anderson said early expectations are for an increase in canola plantings and a large U.S. soybean carryout, which would both weigh on values.
In the more immediate future, Statistics Canada releases its latest stocks numbers on Friday, showing canola supplies in the country as of Dec. 31, and providing a clearer picture of usage to date.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.