In Thursday's Canada Markets Blog, we looked at positive signs seen in the cash basis for canola, while Friday we look at corresponding strength in futures.
As seen on the attached chart, canola closed $5.70 per metric ton (mt) higher this week at $484/mt, its fifth weekly close higher in six weeks.
Friday's high reached $485/mt, just $0.20/mt below the high reached for the week of Oct. 7, while closed above the 50% retracement of the move from the contract high to contract low on the weekly chart, calculated at $483.50/mt. A sustained move above this level could allow for a further move to the $491.30/mt level, the 61.8% retracement of the same downtrend.
Stochastic indicators (first study) on the weekly chart continue to trend higher, while have yet to reach overbought territory on the chart, signaling the potential for a continued move higher.
The lines on the middle study reflect the futures spreads, with the brown line representing the March/May spread, which strengthened $0.30/mt this week to minus $8.70/mt, the narrowest spread seen in four weeks. The blue line represents the May/July spread, which strengthened $0.70/mt to minus $5/mt, its narrowest point seen since August and signaling a less-bearish view of market fundamentals.
The blue bars on the lower histogram show the noncommercial net-short position pared for three consecutive weeks to a net-short of 50,698 contracts as of Dec. 30, while Friday's release as of Jan. 7 shows a fourth consecutive week where this position was decreased to 39,715 contracts, the smallest bearish position held since the week of March 5.
It is important to note that while canola futures struggle with the high reached in October, March crude palm oil in Malaysia reached a fresh contract high on Friday, its highest level reached in three years on the continuous chart. February rapeseed in Europe also reached a contract high this session, its highest level in 34 months on the continuous chart.
In Friday's USDA reports, 2019-20 stocks of major global vegetable oils were reported this month at 19.58 million metric tons, the lowest stocks reported in 10 years while representing a bullish 9.6% of annual use, down from 10.7% last crop year. This also represents the lowest stocks-to-use ratio reported in 14 years given readily available data.
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Cliff Jamieson can be reached at email@example.com
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