CNS Canada — ICE Futures Canada canola contracts are running into major upside resistance from a chart standpoint, with a turn lower more likely than additional gains in the near term.

“The demand component for canola remains quite strong, although domestic crush margins have diminished,” said Mike Jubinville of ProFarmer Canada.

Soyoil futures at the Chicago Board of Trade have already “broken (their) uptrend,” he said.

Large South American crops, together with expectations for increased U.S. soybean and Canadian canola acres, “are the headwinds that limit the ability of the canola market to sustain a trend higher,” he said.

Pointing to a weekly chart, he noted canola faces major resistance in the $530-$540 per tonne range, a level not breached by the front-month contract in any significant fashion since 2013.

“I don’t see anything fundamentally that says ‘We need to do an upside breakout of that,'” said Jubinville.

While he said the upside may be limited, Jubinville was also not bearish on canola.

“We’re in a big supply-versus-big demand environment,” he said, placing the futures in a “broad, sideways range.”

On the supportive side, he said the record domestic crush pace, tightening supplies and solid export demand were all underpinning canola.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.