Winnipeg canola futures have tumbled rather sharply since the start of the month. Cash prices are down nearly a dollar a bushel in this timeframe. We have seen a bit of a levelling off in recent trading sessions, but is it just a pause in the market action? The weakness has been associated with the declines in global oilseed and vegetable oil markets such as Malaysian palm oil, European rapeseed and the Chicago Board of Trade (CBOT) soy complex during the month.
On the export front, sources confirm at least two cargoes of Canadian canola were sold to Pakistan last week. But a lack of follow-through buying interest has limited the canola market’s ability to respond with any upside momentum at this time.
The trade dispute with China remains unresolved. Domestic Chinese rapeseed valuation, if backed off to Canada, suggests prices $30 per tonne above the current market could be achieved if trade to China could be conducted without current blackleg restrictions.
Domestic crush margins on canola seem reasonably good, though there continues to be difficulty in disposing canola meal given the ongoing salmonella trade restrictions on meal shipments to the U.S.
The surfacing of some hedge orders from elevator companies has helped to undermine canola with chart-based speculative liquidation contributing to the market’s steady downward slide. Large domestic supplies of canola and the ample world global oilseed situation are all negative influences.
Weaker outside market factors such as the equities, energy and metals are helping to maintain a defensive tone in the ag markets generally. Therefore, rallies are considered selling opportunities for producers, ahead of the next expected slip lower. That said, supportive short-covering efforts can come into play periodically.
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