Winnipeg – Canola futures on the ICE Futures U.S. platform dropped sharply during the week ended March 6, hitting their lowest levels in two-and-a-half 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.
The May canola contract settled at C$455.30 per tonne on March 6, having lost nearly C$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 C$440 level, which was 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.”