ICE weekly outlook: More downside possible for canola

(Dave Bedard photo)

CNS Canada — ICE Futures Canada canola contracts moved sharply lower during the week ended Wednesday, following the weakness seen in global vegetable oil markets.

The November future hit fresh contract lows, falling to $420.50 per tonne during the Wednesday trading session, beating the previous fresh low of $424.50 on Aug. 15.

The bias is still pointed lower for oilseeds because of expectations of a record large 2014-15 U.S. soybean crop, meaning there could be more downside left for canola, said Ken Ball of PI Financial in Winnipeg.

“There’s probably some downside still in the market because I think if the crop comes through in reasonable shape, canola supplies will still be fairly comfortable this fall,” he said.

But there may not be a lot more downside because the canola market has already come down quite a bit, he said, adding that “we may be playing with the final, $10 to $30 at most.”

It’s still kind of unknown how much canola will be produced in Canada in 2014-15 due to extremely variable conditions across Western Canada this growing season. But the Statistics Canada production report due out Thursday should help to give the market a starting point. [Related story]

The canola market could find some direction from the report, Ball added, as it could be either bearish or bullish.

“The odds of a number popping up that’s dramatically different than what everybody is kind of expecting… are very high, because the level of confidence in the estimates is extremely low,” he said.

Pre-report estimates call for 2014-15 Canadian canola production around 14.75 to 15 million tonnes, which would be down from the 17.96 million grown in 2012-13.

Once the market reacts to the Statistics Canada production data, they’ll go back to watching weather to see how both the Canadian canola and U.S. soybean crops finish off before being harvested, said Ball.

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

 

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