WINNIPEG, Manitoba--With 2024 well underway, canola has very little reason to get excited, according to analyst Wayne Palmer of Exceed Grain in Winnipeg.
"We are trading at levels unseen since 2022. I just don't see a reason why anything can rally, unless there's something really unforeseen," Palmer stated.
"The [speculative] funds rule the roost these days, and whatever the funds are going to do, they're going to take the market wherever they want to," he added.
In the Commitment of Traders report from the U.S. Commodity Futures Trading Commission the net managed money short position in canola was 120,758 contracts as of Jan. 9. That marked one of the largest shorts since 2018 for the Canadian oilseed.
Meanwhile, Palmer said farmers were long by storing much of their canola.
"The last three years...prices were higher. It's a total reverse, prices are lower and [farmers] are looking for a miracle play on the upside," he commented.
One such miracle he said could be a huge jump in exports, which are extremely unlikely at this time.
The Canadian Grain Commission reported canola exports of 2.65 million tons 23 weeks into the 2023/24 marketing year were more than one million tons behind last year's exports.
Palmer pointed a major bearish influence on canola--the forthcoming South American soybean harvest, which will be massive despite cuts to Brazil's output. Initial estimates placed Brazil soybeans at about 160 million tons, but extremely dry conditions in the central and northern growing areas plus an excessively wet south hampered the crop's planting. Now, numerous private consultancies have lowered their projections to either side of 150 million tons, with one chopping its call to about 135 million.
However, reports said Argentina is set to double its soybean production from last year with expectations at around 50 million tons, which more than compensates for losses in Brazil.
With such an influx of soybeans to come onto the market shortly, Palmer said decent canola supplies and a lack of demand for the Canadian oilseed means the outlook in the coming weeks and months isn't very good.
Source: Commodity News Service Canada, news@marketsfarm.com
(END) Dow Jones Newswires
01-17-24 1639ET
