ICE weekly outlook: Room for additional downside in canola

(Dave Bedard photo)

CNS Canada –– ICE Futures Canada canola contracts moved lower on the week, and the market’s declines are likely not finished yet, one analyst says.

Canola lost $42.90 in the July contract and $35.60 in the November contract in the week ended Wednesday, as a rout of fund selling pressured the market.

“I think we’ve got some more downside potential left, as technical selling from the funds could influence more pressure in the market,” said Keith Ferley of RBC Dominion Securities in Winnipeg.

That investor selling is likely linked to a number of bearish factors, which could move the market going forward.

Increased farmer selling, due to favourable crop conditions in Western Canada, is expected to push prices lower into next week.

In general, crop conditions are excellent, but there’s plenty of time left in the growing season, and some areas are seeing less-than-ideal conditions, which could underpin the market moving into the summer.

There are pockets of dryness in Alberta and Saskatchewan, and low-lying fields that are too wet in Manitoba, Ferley said.

“I don’t think anybody is going to complain, but there are issues out there,” he added.

The Canadian dollar edged up slightly on the week, gaining 0.45 per cent, which furthered canola’s losses.

China’s dockage issues have still not been resolved, which has added a bearish undertone to the market, Ferley said. China plans to tighten dockage restrictions on canola, capping some export sales.

A new dockage (foreign matter) policy was supposed to come into effect earlier this spring, but its implementation has been pushed back until September.

“That’s a big negative dark cloud over the marketplace, in terms of keeping some of the export interest at bay,” Ferley said.

In coming sessions, traders are watching a Statistics Canada report due out next Wednesday (June 29), with many investors expecting an increase from the 19 million acres projected in April.

RBC Dominion Securities expects canola acres to be revised upward to 21 million.

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

CORRECTION, June 23, 2016: An earlier version of this article incorrectly identified Keith Ferley as Ken Ball of Winnipeg-based P.I. Financial.

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