ICE Futures Canada canola contracts dropped sharply lower during the week ended Wednesday, and have more room to the downside as record-large supplies continue to overhang the market and chart signals remain bearish.
“Canola has divorced itself from soybeans,” said Jerry Klassen, manager of GAP S.A. Grains and Produits in Winnipeg, noting canola was now trading off of its own bearish fundamentals.
Statistics Canada pegged Canada’s canola crop at a record 18 million tonnes on Dec. 4, which topped trade guesses and came in well above the 13.9 million tonnes grown the previous year.
“With the larger crop, the market needs to function to encourage demand,” said Klassen, “but stemming that the demand is the ability to move off of the West Coast.”
He said canola would “continue to drift lower,” with losses of at least $50 per tonne a possibility before the slide is over.
“We’ll have burdensome supplies in the system for the remainder of the crop year,” said Klassen.
While there will be some minor corrections, any corrections will result in heavy farmer selling as farmers won’t be able to store everything, he added.
– Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.