Glacier FarmMedia | MarketsFarm — The ICE Futures canola market climbed to its highest levels in two months to start October, but ran into resistance and may now need an outside catalyst to continue the uptrend.
Economic stimulus measures announced by China in September contributed to the recent strength in canola, with a reversal of the market sentiment now weighing somewhat on financial markets. Crude oil has also backed away after its own recent strength, with those broader global market factors “taking the top off the canola market,” according to Calgary-based analyst Errol Anderson.
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He said the upward momentum could easily resume in canola, but said participants would be hesitant to take values much higher while the Asian markets were under pressure.
From a chart standpoint, Anderson placed the floor in the canola market at C$600 per tonne, with any moves towards that support level likely bringing in both speculative buying interest and end user demand. “I don’t see canola going below C$600 anymore.”
However, he also cautioned that the upside may also be limited and recommended farmers take any gains as pricing opportunities. “I think we’ve seen the bottom, but sell the rallies … because they won’t hold,” said Anderson.
He added that basis levels were another pricing signal to watch. Tightening basis levels would signal demand, “but if the futures climb and basis widens, that means the rally will be short lived.”
