CNS Canada — ICE Futures Canada canola contracts finished the week ended Tuesday below their recent range, pressured there by a bearish U.S. Department of Agriculture report that sent grain and oilseed markets tumbling across North America.
“Technically the chart looks like it is breaking down, we’re underneath the 50-day moving average in the January contract,” said Keith Ferley of RBC Dominion Securities in Winnipeg.
USDA predicted higher wheat, corn and soybean production and stockpiles for 2015-16 which weighed heavily on the market.
Canola’s January contract had been mostly staying in a range of $470-485 per tonne since late September; however, once values broke below the $470 mark, the selling continued, pushing canola down to $468 per tonne by Tuesday’s close.
Speculators were long on the market and liquidated positions, said a trader, which weighed on canola.
Despite the pressure, Ferley doubted crushers would suddenly become aggressive buyers.
“Volumes are continuing to be light and we’re lacking heavy sell pressure from the farm audience,” he noted.
Another analyst cited Chinese oilseed buying as one of the factors helping keep canola from dropping even further.
“They’re still buying reasonably steady, which is normal for this time of year; they don’t want to risk anything going wrong in South America,” said Ken Ball of PI Financial in Winnipeg.
China knows soybean supplies in the U.S. are ample, he said, and it gives them the leeway to bid aggressively without affecting the price greatly.
“This kind of buying in recent years would have driven prices up sharply.”
Traders may also have been trying to position themselves ahead of the Remembrance Day holiday in Canada on Wednesday. U.S. markets will remain open that day while the Canadian market is closed.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.