CNS Canada — ICE Futures Canada canola contracts moved lower during the week ended Wednesday, as bearish technical signals, declines in the outside crude oil market and losses in CBOT soybeans weighed on values.
While a short-covering correction is possible in the near-term, the longer-term direction will continue to be dictated by soybeans.
The nearby January soybean contract fell below the psychological US$10 per bushel level during the week, which was bearish for canola as well, according to Wayne Palmer, senior analyst with Agri-Trend Marketing.
“Are they going to go closer to $9, or are they going to take this back above $10 for a Christmas rally?” he said, adding, “Whatever way the beans go will take canola with it.”
Palmer said a move down to $9.50 per bushel in soybeans would drag canola below the C$400 per tonne level.
One supportive factor is a lack of farmer selling, as producers are reluctant sellers at current levels and will likely not sell until the New Year unless they absolutely have to, said Palmer.
Canola prices will eventually rally, but that bounce might not come until the spring, he said.
“You always hope that somebody gets caught short cash, and needs to pay $10 a bushel, but as the price goes down — $10 starts to look like a moon-shot,” Palmer added.
Statistics Canada releases updated production estimates on Thursday, which could provide some short-term direction for canola if there are any surprises in the numbers, he said. [Related story]
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.