ICE weekly outlook: Traders watch China, production numbers

(Dave Bedard photo)

CNS Canada –– Two main factors are dominating the ICE Futures Canada canola market, one analyst says, as prices are poised to meet resistance in the near-term.

“The market is looking for some signs of resolution around this Chinese dockage situation, and it just continues to bring a lot of uncertainty,” said Jonathon Driedger, market analyst at FarmLink Marketing Solutions.

China is set to impose new dockage standards on Sept. 1, which could reduce the amount of Canadian canola the country buys. Canadian and Chinese officials met in Beijing earlier in the month to discuss potential solutions, but no resolution came out of the talks.

The regulation change serves to put downward pressure on prices in coming weeks, Driedger said.

“Given that a large crop coming, and that China is such a huge export customer for Canada. It’s pretty significant,” he added.

Traders are watching the size of the upcoming crop as Statistics Canada is set to release fresh production estimates on Tuesday (Aug. 23).

“I think everyone knows it’s a pretty big crop, but there have been some lofty crop size estimates that have been put out there,” Driedger said.

He expected the crop size may be smaller than the number reflected in StatsCan data, as surveys were done during late July.

Canola crops in some areas may have been affected by flooding and disease stress, which could curb yields.

“Again, a big crop, but it may have come down from what people were thinking a little earlier,” Driedger said.

Since last week, canola prices have gained $8 in the November contract, closing at $468.90 a tonne. The January contract gained $9.10 a tonne to sit at $475.70.

Short-term, Driedger said, canola could face chart-based resistance near $480-$485.

If prices see a slight uptick, increased farmer selling could knock them back down, he added.

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

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