Winnipeg, MB, July 9, 2014 (CNS Canada), Jul 09, 2014 (Commodity News Service Canada, Inc. via COMTEX) --

Canola futures on the ICE Canada trading platform were slightly weaker during the week ended July 9, but managed to hold up better than the Chicago soybean market.

Worries about flood damage to canola crops in parts of southwest Manitoba and southeast Saskatchewan prevented prices from dropping as far as soybeans during the week, but it won't likely provide much more support for canola.

"The problem with the situation right now is the soybeans going down, and the market is so bearish on the beans that regardless of the flood, we're probably going to see some pressure on the ICE Canada futures," Errol Anderson of ProMarket Communications in Calgary, said.

"It's unfortunate it's in such great shape because if the US was threatened, canola, quite honestly, would be probably going through quite a rally right now," he added.

As long as soybeans keep falling, canola will eventually start to drop along with them. According to Anderson, the next level of support for US soybean futures is at US$10.80 per bushel in the November contract, which would be about 24 cents US below the July 9 settlement.

"That in itself would push the canola down towards C$440.00 per tonne," Anderson said. "And then if this thing got really ugly and the November beans broke 10.00 bucks, which a number of American analysts are suggesting, then we're probably heading down to C$400.00 on the November canola."

Though the futures market is expected to see a significant drop if the soybean futures continue to break, the cash market may hold up better, as the flooding worries in Western Canada are resulting in a bullish basis outlook longer term, said Anderson.

The 2014/15 carryout stocks of canola will likely be a lot lower than first anticipated because of the lost production, he added. But, it will likely be a few weeks before the full extent of the damage is known, and Statistics Canada's first production estimates in late August will give a better idea of how big the 2014/15 Canadian canola crop will be.

"I know some people are very hard hit, but with floods it's amazing how there's a degree of recovery over time," Anderson said. "So there will be some crop coming for sure. And then there are parts of the prairies that are in perfect shape."