ICE Canada weekly outlook: Canola still trending lower

ICE Futures Canada canola contracts dropped sharply during the week ended July 31, setting fresh lows in the process. A number of former chart support points were breached during the week, with the relatively favourable crop conditions seen across most of Western Canada adding to the speculative selling pressure.
While canola may be looking oversold from a technical standpoint, the path of least resistance remains pointed lower, according to market participants.
“We will have a bounce at some point in time, but guys will need to lower their price expectations overall,” said Reid Fenton of BLB Grain Group in Alberta. He noted that basis levels were better for more deferred delivery, which may be one option for producers looking for better returns.
Looking at the charts, Fenton placed support in the November canola contract at $475 per tonne and then again at $450 per tonne. While the nearby November canola contract, at $485 per tonne, is already at a contract low, values are about average when looking at a monthly chart from the past six years, said Fenton.
“If there was a problem with the (U.S.) soybean crop, we could take canola up a fair bit, but there won’t be a problem with the canola crop,” said Bill Craddock, a local trader and southern Manitoba farmer. He said the relatively cooler temperatures seen during July, compared to 2012, helped in the development of the canola crop, with many areas expecting to see very large yields. Craddock added that some early canola will be ready for swathing within the next couple of weeks.
Fenton added that canola yields were shaping up to come in above average, but noted that cold temperatures recently could cause some concern.

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