CNS Canada –– ICE Futures Canada canola contracts hit some of their best levels in a month during the week ended Wednesday, but appear to have run into resistance from a chart standpoint as the near-term outlook shifts sideways.
The May contract hit a session high of $476 per tonne on Tuesday, but was unable to hold onto its gains and drifted back below the psychological $470 point by Wednesday.
A negative bias in outside financial markets together with a more bearish outlook for soybeans were both expected to keep canola under pressure in the short term.
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Keith Ferley of RBC Dominion Securities said canola looked like it was struggling to the upside, with increased farmer selling putting pressure on values.
Funds are also still holding a large net short position in canola, he added.
Spring is typically a time when investors may look to book profits and cover some of their short positions, said Ken Ball of PI Financial.
While he thought speculative short-covering could prove supportive for canola, the bigger influence would come from the U.S. soybean market.
“They are fighting an ugly situation in beans,” said Ball, adding “there isn’t a bushel of soybeans that is under a weather threat right now.”
Big South American harvests, together with large old-crop beans in Argentina that still need to move, would likely weigh on canola, he said.
However, he also noted the canola market will follow weather conditions across the Canadian Prairies — and those are much more varied heading into spring.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
