Winnipeg, MB, August 27, 2014 (CNS Canada), Aug 27, 2014

ICE Futures Canada canola contracts were slightly weaker during the week ended August 27, managing to come off the fresh lows made on August 22 amid oversold price sentiment.

Downward pressure came from weakness in Chicago soybean and soyoil futures, as weather in the US Midwest continues to benefit an expected record large crop.

But, technical based buying, as the canola market is oversold, helped prices recover some of the losses, and should be supportive going forward, Errol Anderson of ProMarket Communications in Calgary, said.

"I'm viewing the November contract at C$420 per tonne as kind of the line in the sand right now," Anderson said. "On the bounce, up into the C$435 to C$440 would sort of be the top of the rainbow."

The one weakness for canola in the near term could be that soybean prices probably haven't bottomed yet, and canola is likely to be dragged down by the US market, Anderson said.

"But, if the beans break another 25 to 30 cents US a bushel, I think then the beans would be viewed as oversold," he added.

Traders will continue to watch the weather in the US and Western Canada leading up to harvest, with any damage done by recent cold, wet weather in parts of Manitoba and Saskatchewan likely to be priced into the market.

Once harvest is underway, canola prices will be probably be at their worst, Anderson said, but things will start to improve for farmers in the cash market later in the fall.

"The weakness of the cash bids right now is the basis levels," he said. "But in October onward, I think growers can expect and look forward to better basis levels."

How big the 2014/15 (Aug/Jul) Canadian canola crop ends up being will also be a factor in where canola prices move going forward. On August 21, Statistics Canada pegged production at 13.91 million tonnes, though Anderson believes that their estimate is too low.

The next production estimates from Statistics Canada won't be released until October 3, 2014.

Commodity News Service Canada