WINNIPEG, Manitoba--As gains in global crude oil prices have been largely behind the increases in edible oil values, any losses in crude will lead to declines in the edibles. Such was the case on Nov. 3 when crude oil took a dip, pulling down soyoil on the Chicago Board of Trade (CBOT) as well as canola on the Intercontinental Exchange (ICE), according to Errol Anderson, analyst with ProMarket Communications in Calgary, Alberta.
Prices for West Texas Intermediate and Brent crude oils lost well over US$3.00 per barrel on Nov. 3 as United States crude inventories have grown over the last several weeks, and as the OPEC+ alliance is reportedly prepared to up its production by a rather modest 400,000 barrels per day.
"If crude steps down hard on [Nov. 3], it will wear down the corn market and filter into wheat," Anderson said, noting that base commodities such as iron ore, steel and copper are beginning to step back.
"What we are seeing are cracks along the perimeter of the commodity world. The king of commodities, which is crude oil, hasn't broken," he added.
Anderson said it crude were to drop below the US$80 per barrel level it likely would fall to US$75/barrel.
He stressed that CBOT corn prices remain too high, thanks to strong demand from U.S. ethanol producers, and spec funds holding massive long positions.
Should economic downturn in China continue, Anderson said he expects the cracks in base commodities would intensify, and would leave canola at a crossroads.
"Canola might go above C$1,000 per ton the January contract, but in the same breath it could go down to C$950 in a blink," Anderson commented.
Tight supplies and fairly decent demand, despite price rationing, have provided support for canola. Any declines in edible oils, would likely pull the Canadian oilseed down as well.
Source: Commodity News Service Canada, news@marketsfarm.com
(END) Dow Jones Newswires
11-03-21 1656ET
