Canola futures break buoyancy as prices slip
Canola prices had been holding rangebound through September and the first half of October; but the canola futures market has dipped
1 hour ago
4 min read
On Oct. 14, I wrote a column on canola futures, highlighting what, at the time, had been a lacklustre market stuck in a sideways range for the previous month-and-a-half.
While market commentary usually has a short shelf life, that article proved particularly fleeting. Prices broke below long-term chart support the following day and continued lower over the next week as selling built on itself.
After holding from about C$810 to C$840 per tonne for all of September and the first half of October, the November canola contract lost about C$40 in the span of four days to settle at $781.00 on Oct. 20.
With C$800 turning into a stiff resistance to the upside, bearish technical signals could easily see values fall below C$750 per tonne, with more major support around C$730 on the weekly chart.
Harvest and canola prices
Harvest operations are wrapping up across Western Canada, which would typically mean an end to seasonal selling pressure in the canola market. The futures did not seem to follow the typical patterns this year, but increased farmer sales likely exaggerated the recent losses as producers realized the highs may be in and looked to secure some profits before values drop even lower.
Farmers delivered 620,100 tonnes of canola into the commercial pipeline during the week ended Oct. 11, the Canadian Grain Commission reported. While that was down by 19 per cent from the previous week, crop-year-to-date deliveries are 28 per cent ahead of last year’s pace at 4.45 million tonnes.
Those newly harvested supplies are moving out of the country at a steady pace. Crop-year-to-date exports are up 44 per cent on the year at 1.38 million tonnes through 10 weeks.
Crusher demand has also been solid, with domestic disappearance of 2.61 million tonnes to date, up by about 300,000 tonnes from the same time a year ago.
Canola yields and quality in question
In early September, Statistics Canada optimistically forecast canola production at 22.05 million tonnes. That would be in line with the 22.23 million tonnes grown in 2025-26, as reduced yields were countered by increased planted area.
Untimely rains at harvest have many analysts questioning if actual production will end up smaller. Anecdotal yield estimates are varied, but crop reports from all three Prairie provinces have estimated average yields slightly lower than what StatCan projected. The final number won’t be known until early December.
Fund position
In the meantime, chart-based positioning could be a feature in the market.
Managed money fund traders were sitting on a large net long position of around 100,000-110,000 contracts for most the time canola futures were trading in a sideways range.
While a large net-long can be seen as a vote of confidence in the strength of a market, it can quickly become a weight on values — pulling them down as speculators book profits and the long liquidation builds on itself.
Outside markets
Aside from its own technical and fundamental signals, canola will continue to be influenced by activity in outside commodity and financial markets.
The Canadian dollar fell to an 18-month low, relative to its American counterpart in October. This lent some support to the canola market as the softer currency underpins crush margins and makes exports more attractive to international buyers. However, the currency has since recovered to post more modest losses.
The Chicago soy complex has found itself under pressure amid relatively favourable Midwestern harvest weather.
Much like canola, fund traders are also holding a large net long position in soybeans that could weigh on values as they liquidate and book profits.
The ongoing wars in the Middle East and Ukraine and Russia will keep another layer of uncertainty in the markets, as the resulting volatility in crude oil remains another background feature.
The nearby trend for canola has turned lower, but as seen before — trends have a way of shifting suddenly.