Winnipeg – ICE Futures canola contracts will continue to drift downward for the foreseeable future, according to one analyst.
“The demand isn’t here because the buyers know that the farmer is undersold and they have to sell it,” said Wayne Palmer, senior market analyst with Exceed Grain.
The November canola contract dipped below the $485 per tonne mark on Sep. 18, hitting seasonal lows. On Sep. 19 it closed slightly higher at $487 per tonne, however Palmer doesn’t see this continuing.
While the Chicago Board of Trade soybean market was up on Sep. 19, lending slight support to the canola market, it wasn’t seeing a strong rally. According to Palmer, unless there is a rally for the American markets, canola won’t see any support to climb higher.
A larger than expected canola crop is also weighing on markets. Statistics Canada released its updated production numbers on Sep. 19, using satellite data. The report pegged canola at 21.0 million tonnes, which is sharply higher than the previous estimate of 19.2 million.
According to Palmer, farmers are undersold “tremendously” and with the large canola crop there isn’t room for the market to move higher.
“Once (the farmer) gets finished (harvest) I don’t think he has the storage space and I think at these kind of prices doesn’t have the thresh-hold to hang onto it. He’s going to be a seller,” he said.
Palmer thinks the market will continue to go down, however he does think there is support to hold the November contract above $480 per tonne. But if the market breaks $480 per tonne, then it could easily dip to $470 per tonne.
“It just doesn’t look good for the farmer and he didn’t forward sell and he’s hanging on to it. And every day we go down, every day he’s kicking himself around the block wondering why he didn’t sell on the upside,” Palmer said.
Palmer doesn’t see a chance for a rally until maybe after harvest.