MarketsFarm – ICE Futures canola contracts lost ground during the week ended Aug. 2, as spillover from outside markets and easing concerns over the state of the crop ahead of the harvest weighed on values.
Excessive heat during the flowering period in June and July caused canola prices to climb higher, but the market is now getting a better handle on yields with the crop looking in decent shape in many areas, said analyst and trader Jerry Klassen of Resilient Commodity Analysis.
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As a result, fund traders were liquidating long positions and taking some of the risk premium out of the market, according to Klassen. He added that commercial buyers were anticipating an increase of farmer selling by the end of August, when the harvest pressure starts to build, causing export interest to back away from the canola market for the time being.
However, MarketsFarm analyst Bruce Burnett said harvest pressure may not be that large this year, as producers anticipating higher prices will likely only sell enough to meet their cash flow needs and stick most of their crops in the bin.
From a chart standpoint, the November canola contract fell below its 20-day moving average during the week, with the selloff causing the relative strength index to move from oversold into neutral territory.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
