CNS Canada — ICE Futures Canada canola contracts posted large losses during the week ended Wednesday, and could be due for further declines as outside market influences remain bearish.
“There are no bullish factors in the market at all,” said Wayne Palmer, senior market analyst with Agri-Trend Canada, adding “we’re going lower, before we’re going higher.”
He pointed to declining crush margins and expectations for continued weakness in the Chicago Board of Trade (CBOT) soy complex as the major bearish influences for canola.
Analyst Jon Driedger of FarmLink Marketing said the large South American soybean crops now being harvested were weighing on values, with the direction taken in Chicago soybeans likely dictating activity in canola.
However, “demand is still good for canola in the country, and stocks will tighten up as we go forward,” said Driedger.
Palmer agreed exporters and domestic crushers continue to show good buying interest, but said any strength would likely be seen in basis levels rather than the futures.
“If the futures stay where they are right now, they’ll need to improve the basis levels,” said Palmer. He said farmers are reluctant sellers at current prices, which will force end-users to bid up in the cash market if they want to entice deliveries.
“Exporters can’t afford to sell any more cargoes for the 2016 crop, because they can’t be sure they’ll get enough product,” said Palmer.
“I don’t think there’s that much more available for exporters to buy, unless they really jack the price up.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow Phil at @PhilFW on Twitter.Tagged canola contracts, canola futures, cbot, chicago soybeans, ICE Futures Canada