MarketsFarm — Canola futures on the ICE Futures U.S. platform dropped sharply during the week ended Wednesday, hitting their lowest levels in 2-1/2 years.
Concerns over declining Chinese demand sparked the latest selloff in canola amid news that the major canola-buying country had blocked shipments from Canada’s Richardson International.
Canadian canola exporters have faced problems selling into China for the past few months, as they found themselves in the middle of a diplomatic dispute between the two countries.
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As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
The May canola contract settled Wednesday at $455.30 per tonne, having lost nearly $40 per tonne over the past month.
From a chart standpoint, “we’ve broken some key levels technically speaking,” said commodity futures specialist Jamie Wilton of RJ O’Brien in Winnipeg. He placed the next support at the $440 level, last seen in the 2015-16 crop year.
With canola drifting lower, the question now is where and when the demand might come back, according to Wilton.
Whether or not something is sorted out with China, at some point canola will move into other channels.
“There is demand, but it will be shifted around,” said Wilton, adding “traders have to sort out the economics of the whole thing.”
— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.
