(Resource News International) — Canola contracts traded on ICE Futures Canada hit their highest levels in over a year during the past week, but have started to fall off those highs and could be expected to see some further weakness in the near future, as the western Canadian harvest finally starts to pick up steam.
“We’re looking at a harvest pullback,” Oakville, Man. analyst Darren Frank of FarmLink Marketing Solutions said, adding that canola futures could easily move down by another $10 per tonne.
Such a drop would take the November contract to the $460 level, which should provide some chart-based support from a technical perspective.
Warm, dry weather conditions forecast across Western Canada will allow farmers to make some good harvest progress over the next week, Frank said. With quality a concern in many areas, he said farmers would be looking to sell to the elevators off the combine, rather than store the poorer-quality supplies themselves.
Cash bids remain relatively favourable, which would encourage the farmer deliveries, he said.
On the other side, Frank said demand for canola was still firm, with domestic crushers running smoothly and with a good export lineup at the West Coast.
“I don’t think we’ll go down and stay down,” said Frank.
There are still some questions regarding this year’s canola crop that need to be answered, he said. While yield reports are looking good, there is still some uncertainty as to how many acres were actually seeded in Saskatchewan this year, according to Frank. Quality will also be a determinant in the canola market going forward, he added.