MarketsFarm — As the speculative longs for ICE Futures canola keep trying to defend their position, trader Ken Ball of PI Financial in Winnipeg said the pressure on canola continued to build.
That’s especially so with declines over the last few weeks in Chicago soyoil, Malaysian palm oil and European rapeseed, he said.
“No one is really interested in buying canola at these prices. It’s ludicrously overvalued,” Ball said.
Spec longs are hoping there will be a break in the vegetable oil market, in which prices would then climb higher and allow those specs to hang onto their canola contracts, he said.
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“There’s definitely a trigger point where these guys have to get their money out of here,” he stressed, adding prices could easily tumble by $50-$70 per tonne very quickly.
“The massive long position continues to build. It’s extremely vulnerable to a really severe collapse. Unless [the specs] have enough money, saying we’re not letting it go.”
Other than the spec longs, Ball said no one else is buying canola, including the commercials. Crushers are now net sellers and export sales are near zero, he said.
“It’s bending, but it’s not breaking.”
Canola futures could plummet by $100 per tonne and still be doing an effective job in rationing demand, he estimated.
— Glen Hallick reports for MarketsFarm from Winnipeg.
