Glacier FarmMedia | MarketsFarm — The ICE Futures canola market dropped to its lowest levels in a month on Nov. 20, with future moves likely dependent on what happens in outside markets.
“There’s a demand hole here,” said Jamie Wilton, of R.J. O’Brien in Winnipeg, noting that cash basis levels have softened at both domestic crushers and line companies.
With end users well covered for now and backing away from the market, speculative funds were also back adding to short positions in the canola market, said Wilton.
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While canola futures have fallen below most major moving averages, he expected future direction will depend on what happens in outside markets. Large South American soybean crops were a bearish influence, with good relatively favourable Brazilian weather overhanging the oilseeds.
“We need to see some stability on other oilseeds,” said Wilton.
Eventually canola prices will fall to a level that brings demand back to the market, but “what price that is exactly is hard to put a number on,” said Wilton.
Statistics Canada releases updated production estimates on Dec. 5, with most industry participants expecting a downward revision from the 18.98 million tonnes forecast in September. While confirmation of a smaller crop could be supportive, Wilton noted that commercial traders have likely already priced that into the market.
