ICE Futures Canada canola futures continued to move lower during the week ending Wednesday (Dec. 18), resulting in a total loss of more than C$30 per tonne in nearby contracts since early December.
Recent declines in canola are linked to the large Canadian canola supply situation, as well as logistical problems in Western Canada.
Declines in Chicago soybeans also spilled over to weigh on canola values during the week, as record-large crop prospects out of South America were bearish.
But even though prices have dropped sharply recently, they haven’t found a bottom yet, said Errol Anderson of ProMarket Communications in Calgary.
Anderson added that Canada is facing heavy congestion within all the grains, which will likely be bearish for canola going forward.
“We’re also having problems on the wheat side. Cash purchases are starting to stall, which will pressure the U.S. wheat market more,” he said. “And corn prices are at risk of going lower as well.”
Anderson also expects the Chicago soybean market will break soon, which would also be a bearish influence for canola.
“When they (soybeans) break, they could break US50 cents a bushel fairly quickly,” he added. “That will just prod canola.”
The next level support for canola comes in at the C$440 per tonne level in the January contract, and if it breaks below that, $420 will become the new support.
But the canola market could move even lower than the $420 per tonne level, said Anderson.
“If you look at a monthly chart, there’s a case to be said that it could go all the way down to $370 per tonne,” he said.
Anderson added that if the market does drop that low, basis levels will likely improve to stabilize cash bids in Western Canada.
– Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.