ICE weekly outlook: Large crop overhanging canola

ICE Futures Canada canola contracts moved lower during the week ended Wednesday, hitting their softest levels in nearly two months as harvest pressure and spillover from the declines seen in the CBOT soy complex weighed on prices.

While rain delays were being reported in some parts of Western Canada during the week, the advancing harvest and general expectations for a record-large crop are expected to keep the general bias pointed lower in canola, according to participants.

Statistics Canada releases its latest production estimate on Friday and average trade estimates come in at around 16.5 million tonnes. That would be more than two million tonnes above the previous record, and compares with the 2012 crop of 13.9 million tonnes.

If the official StatsCan number comes in above trade guesses, it could add to the bearish tone in canola, said Jon Driedger of FarmLink Marketing Solutions.

However, a production estimate in line with trade guesses would do little to move the futures, as the large crop has already been factored into the market.

Even if StatsCan comes in at the low end of expectations, market participants may downplay the report amid ideas that the actual larger number will come out in the December report.

However, given how much canola there is, it will be tough to rally without help from soybeans, Driedger said, adding that “what happens in soybeans will continue to be influential.”

Logistical issues moving the large crop are also expected to come to play in the market. The futures will function in order to buy in some demand, but Driedger noted that issues such as port capacity and rail capacity could create some challenges.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Related story:
Upward revisions expected for StatsCan’s crop estimates, Oct. 2, 2013

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