CNS Canada — ICE Futures canola contracts will continue to drift downward for the foreseeable future, according to one analyst.
“The demand isn’t here because the buyers know that the farmer is undersold and they have to sell it,” said Wayne Palmer, senior market analyst with Exceed Grain.
The November canola contract dipped below the $485 per tonne mark on Tuesday, hitting seasonal lows. It closed slightly higher Wednesday, at $487 per tonne, but Palmer doesn’t see an upward trend continuing.
While Chicago Board of Trade soybeans were up Wednesday, lending slight support to the canola market, they weren’t seeing a strong rally. According to Palmer, unless there is a rally for the U.S. markets, canola won’t see any support to climb higher.
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A larger-than-expected canola crop is also weighing on markets. Statistics Canada on Wednesday released updated production numbers modelled in part on satellite data. The report pegged canola production at 21 million tonnes — sharply higher than the previous estimate of 19.2 million.
According to Palmer, farmers are undersold “tremendously” and with the large canola crop there isn’t room for the market to move higher.
Once the farmer completes harvest, Palmer said, “I don’t think he has the storage space and, I think, at these kind of prices, doesn’t have the threshold to hang onto it. He’s going to be a seller.”
Palmer thinks the market will continue to go down, but does think there is support to hold the November contract above $480. If the market breaks below $480, though, it could easily dip to $470 per tonne.
“It just doesn’t look good for the farmer and he didn’t forward sell and he’s hanging onto it. And every day we go down, every day he’s kicking himself around the block wondering why he didn’t sell on the upside,” he said.
Palmer also doesn’t see a chance for a rally until maybe after harvest.
— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.
