Winnipeg – ICE canola futures fell sharply lower during the week ended July 11, but could still have more room to the downside as the oilseed remains overpriced compared to the slumping United States soybean market.
Mounting trade tensions between the U.S. and China led to a selloff in Chicago Board of Trade soybeans during the week, with speculative selling also spilling into the canola market.
While speculators may be spooked for the time being, “the fact that there’s a new round of trade threats is utterly irrelevant to the grain markets,” said Ken Ball of PI Financial in Winnipeg. He said the tariffs would likely just shift the movement of U.S. soybeans away from China and to other destinations, as end users capitalize on the falling prices. “Other world buyers of beans are just pouring into the U.S. market,” said Ball.
That commercial interest should provide a floor for the oilseeds, including canola, but Ball expected speculators would remain aggressive on the short side as the path of least resistance remains pointed lower.
November canola fell below the psychological $500 per tonne mark on Wednesday, July 11, with the next target at C$490 per tonne, according to Ball.
However, comparing the canola chart to the soybean chart, Ball said the possibility is there for even larger losses as canola is still looking expensive relative to soybeans.
In addition, while some areas of concern remain across the Prairies, the majority of the canola crop is in good shape. “It’s not perfect . . . but we have a decent canola crop here,” said Ball adding that the harvest will likely be starting up within four weeks in some areas.