WINNIPEG, Manitoba--Canola futures on the Intercontinental Exchange kicked off the week with sharp losses, as the most heavily traded January contract busted through its support level of 700 Canadian dollars per metric ton. An analyst expects the trend to be lower.

Among the reasons for canola's steep fall, analyst David Derwin said, were the better-than-average yields from this year's Prairie harvest.

"Most people are done [combining] but there is still some canola out there and the story is the same, what's coming off is a little bit better than anticipated. That's kept the pressure on canola," said Derwin, the commodity futures adviser for PI Financial in Winnipeg.

He also cited the inability of the nearby November soybean contract to firmly remain above $13 per bushel at the Chicago Board of Trade.

"It's just a little bit of financial gravity continuing to pull down on these markets," he said of ICE canola and the Chicago soy complex.

"You look at where we came from, C$800 to C$700 and now underneath that in a matter of a couple of months," Derwin said about canola, adding the longer-term trend was pointing lower.

However, he said a reprieve is always possible with a price shift of C$50/ton, maybe C$100.

The downward trend in canola won't last indefinitely, according to Derwin. But most likely canola would become rangebound for upward of two to three months before breaking out.

As for farmers who are leery about selling their canola, he suggested a few options.

"Whether they want to make some sales of canola, replace that with some call strategies if it moves higher, or if they have concerns and don't mind holding it in the bin," Derwin said, adding put strategies are to be considered.

Farmers should consider current interest rates, he said.

"[They] are a lot bigger factor now than they have been for years," he said, noting operating lines of credit are most often 7% to 8%. "That's a lot of money on canola that over the course of a year, at 8% it's C$50 per ton. That adds up."


Source: MarketsFarm, news@marketsfarm.com


(END) Dow Jones Newswires

10-25-23 1714ET