WINNIPEG, Manitoba--ICE Futures canola contracts continued to show some modest strength during the week ended January 24, as the market stabilized above the lows hit earlier in the month.
However, whether the uptrend continues or canola retreats to fresh lows remains to be seen.
While the market was showing signs of creating a bottom, "there is a pattern in the canola market going back to the summer where we sell off, sell off too hard, then rebound a bit and consolidate, and then fall again," said MarketsFarm analyst Mike Jubinville, adding there was nothing yet to indicate the pattern had changed.
With the March contract trading right around its 20-day moving average on Jan. 24 at C$634.30 per tonne, Jubinville placed the next upside target at the former support level around C$650 to C$660 per tonne. "Can we get there? I'm not entirely sure," he said, noting that a move below C$600 was still entirely possible.
Domestic crushers continue to operate at near full capacity, but export demand for canola has been lacking.
Jubinville said it would likely take increased export demand or an outside catalyst, such as weather concerns with South America's soybean crop, to break canola out of its downward trending pattern.
Speculative short covering could also provide a boost, as fund traders hold a record large short position in canola.
However, Canadian farmers are undersold, which means any pop in the local market will trigger farmer selling, according to Jubinville.
"Even if the funds are extraordinarily short the futures and will someday cover that position, every little bump in the market will draw just enough farmer selling to quash the bullish enthusiasm...so we're stuck right now."
Source: Commodity News Service Canada, news@marketsfarm.com
(END) Dow Jones Newswires
01-24-24 1712ET
