CNS Canada –– The ICE Futures Canada canola market moved lower during the week ended Wednesday, breaking below the key support level of C$480 per tonne in the November contract.
With the technical bias pointed lower, further weakness is expected to be in store for the commodity.
“I think the ideas in the trade are that the funds are relatively even so we could see the funds now really start to weigh on this market going into harvest,” said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.
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Klassen pegged the next downside target for the ICE canola market at the $450 per tonne level, while other traders say prices could find support at $460 per tonne.
Reports that the Canadian canola crop looks better than first anticipated have weighed on values recently, as has weakness in outside vegetable oil markets.
While the market should stay soft going forward, as harvest will soon be in full swing, traders will also be paying attention to weather conditions during the last few weeks of the growing season, as some of the later reseeded fields still need at least two weeks of frost free weather.
Klassen said he believes there will be a lot of canola coming onto the market once harvest is in full swing, as relatively good prices will make canola the “cash crop” for farmers needing to pay their bills this season.
The upcoming survey-based production report from Statistics Canada will also be watched, as any surprises could cause a knee-jerk reaction in the market.
Pre-StatsCan-report estimates for canola range from 12.5 million tonnes to 14.5 million tonnes.
If Statistics Canada comes out with a figure above 14 million tonnes on Friday, the crop will likely end up being over 15 million tonnes as conditions have improved since the survey was conducted, according to Ken Ball of PI Financial in Winnipeg.
In the longer term, China will continue to be a big player in where Canada’s canola market goes, as it’s been a large buyer of the commodity in recent years.
“I think the wild card variable is how China is going to respond over the next six months with the economic uncertainty,” said Klassen.
“If we don’t see significant interest from China, even with the smaller crop size, the market will have sufficient stocks.”
