Technically Speaking

Vegetable Oils Showing Bullish Change

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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After falling to a 13-year low in March 2020, spot soybean oil prices have turned higher and are showing bullish divergence in the monthly stochastic -- a technical sign the long-term downtrend may have run its course (DTN ProphetX chart).

Spot Soybean Oil:

August soybean oil closed up 2.77 cents (+10%) in the month of July, finishing at a new five-month high of 30.91 cents Friday. Vegetable oil prices in general have been helped by increased demand in 2020 and by coronavirus-related labor problems in Malaysia reducing palm oil production. Soybean oil and palm oil prices were among the top performers of ag commodities in 2019 and are among a handful of ag commodities that have outperformed the S&P 500 index the past three months. The monthly stochastic for spot soybean oil shows bullish divergence and is the first to turn higher among grain-related contracts. Technically, the 13-year low spot soybean oil prices reached in March is apt to stand as a long-term low.

Spot Malaysian Palm Oil:

Spot Malaysian palm oil closed up 380 ringgits (+17%) in July, finishing the month at 2,677 ringgits per metric ton, the highest monthly close in 2020. Measures to limit the spread of coronavirus in Malaysia has resulted in a lack of foreign workers to help with palm oil production. Prices turned higher after briefly falling below 2,000 ringgits in early May. Similar to soybean oil, the monthly stochastic in palm oil shows bullish divergence. In this case, there is possible technical resistance around 3,200 ringgits, an eight-year high.

Spot Canola:

November canola closed up C$15.50 (+3%) in July, ending at C$491.50 per metric ton, its highest monthly close in over a year. Canola prices have been suppressed for more than a year after the arrest of a Huawei executive back in December 2018 as China responded by shunning the purchase of Canadian goods. Prices briefly dipped below C$430 in May 2019 and chopped in a sideways range for the next year, supported by commercial net-longs. This month's new one-year high is the first clearly bullish move in canola in a long time as prices finally show signs of joining the bullish parade in vegetable oil. The most obvious candidate for potential resistance is the seven-year high of roughly C$545 per ton.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities and futures contracts involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

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