WINNIPEG, Manitoba--ICE Futures canola contracts posted some wide price swings over the week ended July 21, moving lower overall as the market backed away from nearby highs and speculative profit-taking weighed on values.
"The trend is higher, but you can't go up forever," said trader Ken Ball, of PI Financial in Winnipeg.
He said that while rains during the week in parts of the Prairies had likely contributed to the selling pressure, the crop is still deteriorating due to hot and dry conditions during the growing season with plenty of room for further damage.
A report from Agriculture and Agri-Food Canada was another bearish price influence, as the government agency pegged the canola crop at the surprisingly large level of 19.9 million tons.
Given the adverse growing conditions, the actual crop is likely closer to 16 million to 17 million tons, which would be well below the 18.7 million grown in 2020, according to Ball. The Canadian industry is well aware that Agriculture Canada typically waits for the official Statistics Canada survey results at the end of August to adjust their production estimates significantly, but Ball said international participants were likely reacting to the "unfortunate" headline number.
"The big spec money would see that and take it seriously, not knowing that the crop is millions of tonnes below that," said Ball.
From a technical standpoint, the November contract hit a high of C$949 per ton on July 13. At the time canola was looking expensive and due for a correction, but crush margins have improved since and could be seen as a sign that canola is now cheaper than it needs to be, according to Ball.
He added that retesting that level will likely depend on what happens in the Chicago Board of Trade soybean and soyoil markets over the upcoming weeks.
Source: Commodity News Service Canada, news@marketsfarm.com
(END) Dow Jones Newswires
07-21-21 1658ET
