It’s a dismal outlook for the ICE canola market as it has hit new yearly lows and could go lower still, according to one trader.
“Unfortunately the news for the moment doesn’t seem to be overwhelmingly bullish news. It continues to be a little bit on the tad negative side,” said Keith Ferley of RBC Dominion Securities in Winnipeg, Man.
Canola contracts hit yearly lows at market close on Oct. 31. The January contract closed at C$486 per tonne, dropping more than C$2 during the day. It had been falling in value daily over the previous days.
According to Ferley, the main things driving the oilseeds markets currently are the United States/China trade war and soybean planting in South America, especially in Brazil. News earlier in the week showed that soybean seeding in Brazil is ahead of normal with good rains aiding in planting.
“I hate to keep harping on that, but the trade situation between China and the U.S. has really been the overlying negative influence on all these oilseeds,” he said.
Canola has also been seeing seasonal harvest pressure with producer deliveries hitting record highs. However, Ferley said selling should start to level off as harvest wraps up. Forecasts heading into the next week are showing a return to wet weather which will slow down whatever is left to harvest.
“We’ll see some farmer selling here in the short-term. But I think we’ll likely see by the end of those two weeks farming selling start to slow down a bit,” Ferley said.
The U.S. soybean harvest is also affecting the market. The latest crop progress report from the U.S. Department of Agriculture showed the soybean harvest is 72 percent done as of Oct. 29, up 19 percent from the previous week, but still behind the five-year average.
The Canadian dollar has also been influencing the market. It has been on the downswing lately with the lower value helping to limit losses for the canola market. Ferley expects that it will continue to be weak.
Heading into the last few months of the year there could be grain shipping issues. August saw record crude oil shipments by rail, according to Ferley.
“The markets concerned that we could see that steadily increase, which could start or continue to jam up grain shipments,” he said, adding that that is something to keep an eye on.