Jan. 11 canola trade saw a divergence in price from soybeans, soybean oil, palm oil and rapeseed ahead of Tuesday's USDA report, reaching a fresh contract high and holding gains to close near the upper end of the session's range. The March closed $7.60/mt higher at $672.80/mt. Canadian dollar weakness was a supportive feature, with the spot loonie weakening 40 basis points against the USD. Canola's own fundamentals continues to push prices to higher levels.
It is interesting to note from the first study on the chart that while the March contract has faced two losing sessions out of the last 10 sessions, daily volume has been lower than the 20-day moving average (black line) in eight of the 10 sessions. It is not taking considerable volume to move this market higher.
The second study shows the March/May inverse (brown line) and the May/July inverse (blue line) showing strength since Jan. 4/Jan. 5, a sign of a growing bullish sentiment led by what seems the commercial side of the trade. As seen in the histogram bars of the lower study, the bullish noncommercial net-long position has fallen in each of the past two weeks ending Jan. 5, a show of caution while the market continues to tick higher.
While a forecast that doesn't gain a great deal of attention, the USDA's forecast for global canola/rapeseed stocks will be interesting to watch in Tuesday's data release. In December, the USDA estimated global stocks for 2020-21 at 5.085 million metric tons, down for a second year and relatively close to their forecast of 5.128 mmt for 2016-17. This particular forecast included 10 mmt of exports from Canada and Canada's ending stocks at 1.750 mmt for 2020-21. This export forecast falls well-below the current pace of exports, while Agriculture and Agri-Food Canada is currently estimating Canada's ending stocks at 1.2 mmt for July 31 2021. A 550,000 mt lower revision in global stocks could see 2020-21 global stocks challenge the USDA's 4.531 mmt estimate for 2007-2008.
In addition, the International Grains Council released five-year projections by commodity on Monday. Its 2020-21 global stocks estimate for global rapeseed of 6 mmt is forecast to fall for at least the next two years. Data tables show stocks falling for three years to 4.5 mmt in 2023-24, while to grow only slightly to 5 mmt by 2025-26. Confusion lies with the chart for this data, which shows an uptick in stocks in 2023-24 and a rise above 5 mmt in 2025-26.
Cliff Jamieson can be reached at email@example.com
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