ICE weekly outlook: Canola due for corrective bounce

(Dave Bedard photo)

CNS Canada — The November ICE Futures Canada canola contract broke below the key psychological level of C$400 per tonne during the week, but recovered Wednesday to settle just above that level.

In the near term, the canola market is “due for a little bit of a reprieve,” said Errol Anderson of ProMarket Communications in Calgary.

Another bit of support for the market could come from a weakening Canadian dollar, as it makes canola more attractively priced for exporters. It also helps improve crush margins.

“There’s sort of a case to be said that the loonie might go down to US88.5 cents,” Anderson said. “So, if that happens that’ll give canola some reinforcement.”

In the near term, the market could be headed back up toward C$412 per tonne in the November contract since it broke above $400 on Wednesday, Anderson said.

But the long-term outlook for the canola market remains bearish, as soybean futures on the Chicago Board of Trade are expected to continue falling. [Related story]

Anderson expected the November canola contract could drop to the $380 or $370 per tonne level before finding support, due to harvest pressure and weakness in global vegetable oil markets.

Traders will continue to monitor harvest progress and weather in both Canada and the U.S. It’s fairly clear that U.S. soybean production is going to be record-large, but Canadian prospects are still kind of up in the air.

It’s generally expected that the Canadian crop will be larger than Statistics Canada’s 13.9 million-tonne estimate in August. How much larger won’t be known, however, until more yield reports come in. Statistics Canada’s Oct. 3 Canadian production report will also help give a better idea of how large the crop will be for 2014-15.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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