WINNIPEG--Wet weather in the Canadian Prairies and the U.S. Northern Plains has brought downward pressure onto ICE Futures canola prices, taking the market off the contract highs hit in early June. Losses in palm oil and soyoil were also bearish.
While precipitation, or the potential of it falling over canola-growing areas in Western Canada and the U.S., has caused canola prices to fall, the sentiment among market participants hasn't exactly tracked with current crop conditions.
"The rain events essentially stabilized crop potential in the southern parts of the Prairies, especially in the eastern parts," said MarketsFarm Pro analyst Mike Jubinville. "When we switch to North Dakota ... they have brutal crop conditions. Absolutely baked. While some of the rains over the past week helped stabilize something there, they are having the worst crop conditions in U.S. history right now."
The vegetable oil market, primarily soy oil and palm oil, is also in freefall and that has brought additional pressure onto canola prices. With the exception of soymeal over the past two days, the entire Chicago soy complex has been in the red, with soybean contracts losing at least 20 cents per bushel each day.
Why the vegetable oil market is going down is anyone's guess, according to Mr. Jubinville.
"We just can't explain it. (There's) talk of slowing demand (and) bigger production, but those sound like generic terms. It doesn't explain it," he said. "We are in an extraordinarily volatile trading environment right now ... (There) are speculative players who have been very heavy on the long side of the marketplace and when the red line crosses the blue line on a chart, they flush out and we've had big flush-outs."
Mr. Jubinville also said there is still room for canola prices to drop in the coming weeks should there be a rainy re-occurrence. He also reiterated canola is currently in a "weather market," contingent on the next forecast and now focused solely on new crop.
"If next week's rains come as they were originally forecast through the (U.S.) Corn Belt affecting corn and soybean production, it's going to confirm some of the selling we've seen this week," he said. "But there doesn't seem to be a lot of organized precipitation coming. We've bought ourselves two, maybe three weeks time and then we're back where we were before with a drought problem."
(END) Dow Jones Newswires