CNS Canada — ICE Futures Canada canola contracts held rangebound during the week ended Wednesday, although the bias remains pointed lower in the most active contracts, as a bearish outlook for the U.S. soybean market is expected to overpower any supportive news for canola.
“The worldwide market isn’t paying attention to the emerging Canadian production problems,” said Mike Jubinville of ProFarmer Canada. He noted consistent rainfall in the forecasts across Western Canada will slow harvest operations and development for later maturing fields.
However, improving U.S. crop condition ratings and expectations for a record-large U.S. soybean crop sent soy futures to contract lows during the week, which was bearish for canola.
“In the grand scheme of things, we’re not driving the bus,” said Jubinville.
From a technical standpoint, the November canola contract flirted with contract lows during the week, but managed to hold above the $415 per tonne level. “It hasn’t broken below it yet, but I have a feeling that it’s just a matter of time,” said Jubinville. The $400 per tonne level could provide the next downside target, he said.
On the other side, it would likely take a bullish surprise out of the U.S. to spark a move higher in canola. Traders will also be watching the Statistics Canada ending stocks report, out Friday, for some direction.
Jubinville said speculators were holding a very large short position in canola, which could lead to a short-covering bounce.
He expected a move above C$430 in the November contract could trigger an “accelerated unwinding of that short position.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.