Canola contracts on the ICE Futures Canada platform moved lower during the week ended Wednesday, hitting their softest levels in a month as harvest pressure weighed on values.
With expectations for a record-large crop, the path of least resistance is expected to remain pointed lower in the near term, although canola will also take some direction from activity in the U.S. soy complex.
Adding to the routine harvest pressure is the fact that production is likely to be record-large this year, said analyst Mike Jubinville of ProFarmer Canada in Winnipeg.
“The amount of canola being pushed into the commercial system is putting constraints on the logistical system,” which, he said, was putting pressure on both the futures and the cash prices for canola.
While harvest pressure is a bearish factor in canola market, “the overwhelming feature impacting the canola market is the soy complex,” he said.
Canola would be considerably cheaper, he said, “were it not for the fact that the soy market has held up.”
With the U.S. soy harvest still a couple of weeks away, Jubinville said relatively tight supply/demand fundamentals in the U.S. were supporting soybeans, and in turn canola.
The U.S. soybean harvest will limit the upside potential, with the general bias holding to the downside in the near-term. “There’s an ebb and flow here and a bounce is coming, but it won’t happen for a couple of weeks yet.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.