CNS Canada — ICE Futures Canada canola contracts posted large losses during the week ended Wednesday, and could be headed even lower, as bearish technicals and weakness in global economic markets outweigh supportive fundamentals.
“We’re going into a seasonally slower demand period,” said Errol Anderson of ProMarket Communications. A downgrade of China’s credit by Moody’s rating triggered weakness across the board, he added.
On May 24, ratings agency Moody’s downgraded China’s rating for the first time since 1989, citing concerns over rising debt in the country.
“The China thing overall has put a dull tone over global commodities, period. It’s just capped everything,” said Anderson.
Technical charts are looking bearish for canola, he added, as the new-crop November contract broke below support at $488 per tonne during the week. Anderson placed the next downside target at $478 per tonne.
However, he added, buying could come forward if canola moves much lower, possibly encouraging a small correction higher.
Weather concerns in parts of Western Canada also have the potential to provide support.
“The market has to respect the problems that are prevalent in northern Alberta and Saskatchewan,” said Anderson, adding that some acres won’t be seeded.
“It’s a little bit of a shock for the guys that are struggling to see the market go down,” said Anderson.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.