MarketsFarm — The ICE Futures canola market dropped to fresh contract lows on Tuesday but managed to find some support to the downside and may stabilize for the time being amid oversold price sentiment.
The May canola contract, which had started 2020 trading in the $490 area, touched a low of $455 per tonne on Tuesday and settled Wednesday at $456.50.
World vegetable oil markets have found themselves in a steady downtrend over the past two months, after closing out 2019 at multi-year highs.
In addition, uncertainty over the “black swan” COVID-19 coronavirus “has created a real risk-off attitude across commodities in general, and canola is caught up in that,” said analyst Mike Jubinville of MarketsFarm Pro.
While more downside is possible, Jubinville expected the lows may be in for now, barring fresh bearish developments on the virus-front.
While global transportation flows may be affected, “the demand for food is still the same,” he said.
That said, a rally is also unlikely, according to Jubinville, who pointed to a lack of developments on Chinese purchases of U.S. soybeans as a bearish influence.
Blockades disrupting rail traffic across Canada have also thrown more uncertainty into the mix.
“It’s a sideways-trending marketplace,” he said.
Seasonal price flows could help bring prices back to the upper end of the range over the next few months, he said, but added that a more sustained rally was unlikely in the current environment.
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.