ICE Futures Canada canola contracts moved lower during the week ended Wednesday (Nov. 20), with the January contract closing just above the key support level of C$480 per tonne.
Some of the weakness in the market was linked to spillover pressure from the losses seen in the Chicago soybean complex and reports of high oil content in the U.S. soy crop.
The large Canadian canola crop also weighed on prices, as did news that the U.S. Environmental Protection Agency is proposing to lower the ethanol mandate for 2014.
With the January contract hovering just above key support, the future of prices will depend on whether or not the market can hold above $480 per tonne.
“I am a little nervous about what would happen if (the $480 per tonne level) goes,” said Ken Ball of PI Financial in Winnipeg. “It’s just one of those key spots where you just might trigger a lot of follow-through selling if you break that.”
Ball noted the bias in the canola market is leaning lower, due to the vegetable oil situation looking a little bit weaker. He added the market doesn’t have much to get excited about, because the U.S. soybean crop is more or less safely in the bin.
But, that doesn’t mean prices don’t have any room to move higher, Ball said, adding that the market is leaning about 60/40 to the downside.
“It’s not a slam-dunk that we’re going lower for sure,” he said. “I’d say the bias leans that way, but it’s not for sure that we’re headed that way.”
Traders will be paying attention to what happens with the South American soybean crop going forward. So far, conditions have been good for the crop, but it’s still too early to pencil in a record-large crop, Ball said.
“The further every week we move along with no major crop problems emerging (in South America), the more it will weigh,” he added.
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.