CNS Canada — ICE Futures Canada canola contracts were mixed during the week ended Wednesday, with losses in the most active November contract but a slightly firmer tone in the more deferred positions.
With harvest pressure only beginning in Western Canada, and the U.S. soy complex looking bearish, the front month will likely keep drifting lower for the time being, according to an analyst.
“Canola is in a downtrend; the buyers are not here yet to buy it,” said market analyst Wayne Palmer of Agri-Trend Marketing. “They know the harvest is around the corner and the farmer is undersold.”
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Cash flow and storage needs will see producer selling pick up in September, he said, with little upside potential in canola until after the U.S. soybean harvest in October.
From a chart perspective, Palmer said $445 to $450 would provide some solid support to the downside for November canola.
“We will go lower before we go higher, it’s inevitable,” he said. However, he added, “the lower prices go, the higher the bounce.”
The funds had been holding a long position as large as 50,000 contracts earlier in the summer, but are now net short between 15,000 to 20,000 contracts, according to Palmer.
While they are still adding to those shorts for now, eventually they will need to come back and either buy those positions back or roll them forward.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.
