CNS Canada — Canola futures were holding relatively steady during the week ended Wednesday, and are expected to continue in a rangebound pattern this winter.
The March future is likely to find major resistance at the $440 per tonne level over the next month or so, said Jerry Klassen, manager for Swiss-based GAP SA Grains and Products in Winnipeg.
“When the March futures move up to $440 per tonne, that’s the $10 dollar a bushel area in Western Canada, and there is a tidal wave of (farmer) selling at that level,” he added. “So, that will cap any strength we have.”
The market is also expected to continue following Chicago soybean futures, though canola lagged them to the upside during the week. Traders are reluctant to push the Canadian canola market too far one way or the other until it is clear what direction the U.S. market is headed in, brokers said.
According to Klassen, there is more upside possible in the U.S. soybean market, despite the large production harvested this year.
“I always caution people about being too bearish on the beans, given the fact the market has absorbed about 60 per cent of the farmer selling already and we haven’t been able to break this market,” Klassen said.
“I think when the carryout of the beans is so large, there’s a tendency that as you move through the crop year, the carryout shrinks because of larger exports, or greater domestic crushing.”
Canola futures could start to move higher as well, and will likely break above the $440 per tonne resistance level in the March contract heading into the spring of 2015.
“I think eventually for next spring the market needs to encourage acreage,” Klassen said. “So when the market does move above $440 per tonne, then you could see another $20 to $30 of upside.”
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.