Canada Markets

November Rapeseed Reaches Fresh Contract High

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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European rapeseed for November delivery gained EUR3.50 on Wednesday, reaching a fresh contract high. The first study shows a minimal Nov-Feb carry of EUR.25, with the November close to inverting over the February contract. The lower study indicates that current prices are overbought, which hasn't deterred buyers. (DTN ProphetX chart)

Recent weakness in the Euro exchange with the United States dollar along with a heatwave in Europe expected to see highs reach over 40 degrees Celsius are supportive features for the grains.

The November European rapeseed contract gained Eur3.50 on Wednesday to close at EUR379, the contract's second consecutive higher daily close that has added EUR5.25. Wednesday's move resulted in a contract high for the November contract, while the November/February spread closed at a bullish carry of minus EUR.25 (February trading over the November), on the verge of reaching inverted territory.

While not shown, a look at the continuous active chart shows the current move reaching the crop's highest level in close to eight months, with resistance on the long-term monthly chart seen at previous highs of EUR381.50 and again at EUR387. So far this month, a gain of EUR14.75 has been realized, which if held to the end of the month, would be the largest monthly gain in one year while printing a bullish outside-month trading bar on the long-term monthly chart.

While the European Union forecast 2019 rapeseed production at 18.711 million metric tons in late June, down from 20.043 mmt produced in 2017-18 and 13.6% below the five-year average, private estimates released in July from Strategie Grains point to an estimated 17.8 mmt crop, the smallest in 13 years, while Oil World has forecast a 17.5 mmt crop. As a result, record imports ranging from 5.4 mmt to 5.6 mmt are forecast, up from an estimated 4.2-4.3 mmt in 2018-19. The July USDA WASDE report shows a production estimate of 18.7 mmt for 2019-20, with imports estimated at 4.7 mmt.

One headline on Wednesday points to Dutch rapeseed oil hitting a six-month high on Chinese interest. A ProphetX chart for rapeseed oil FOB Rotterdam shows price gapping higher on Wednesday and closing at $856.25USD. This is the highest close reported in over seven months and a 10% increase from the recent April low of $777.75/mt USD, the lowest level in 21 months.

A glance at the rapeseed/canola supply and demand tables released by the USDA in July would indicate that European production could be revised over 1 million metric tons lower while Canada's production could be revised 1-1.5 mmt lower in upcoming releases, a move that could result in global stocks testing the tightest levels seen in the past 10 years.

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