New-Crop Canola Weaker after Overshooting to Upside

Old-crop canola fundamentals remain strong, but the new-crop November future has been trending lower over the past number of days.

As the futures chart below shows, the November 2022 contract reached a high of about $840/tonne around the middle of month. Since then, however, the contract has steadily lost ground and closed Thursday at just over $807.

The new crop November 2022 contract had overshot to the upside and was due for a correction, said Keith Ferley, of RBC Dominion Securities in Winnipeg. However, he added that any weakness would likely be met by commercial buying.

"New crop canola was way over valued, and is attracting some selling," added Ken Ball, of PI Financial in Winnipeg.

As far as the more actively traded old crop contracts are concerned, both traders said the underlying fundamentals remain strong. However, the tight supply situation has been priced into the futures for some time and canola may need of fresh news as it looks overvalued compared to other oilseeds.

"Things have been choppy and erratic the past few weeks," Ball said, adding that "the oilseeds have shifted into neutral."

With attention turning to South American production, any weather issues with the soybean crop there could dictate some price movement in canola, Ball said. Movement in the energy markets will also be closely followed, Ferley noted.