Canada Markets

The canola market was not alone in facing a test of support in Tuesday's trade. European rapeseed, as traded on the NYSE Paris Liffe, held above long-term support at EUR 351.82 in Tuesday's trade, which represents the 61.8% Fibonacci retracement of the move from the July 2009 low of EUR 244 to the July 2012 high of EUR 526.25, as seen on the continuous weekly chart.

The November soybean chart shows that Tuesday's session came just 3/4 cents from testing support at $11.64 1/2/bu, which represents the 50% retracement of the move from the February 2010 low of $9.19/bu to the September 2012 high of $14.09 3/4/bu. Tuesday's trade saw a bounce near the end of the session to close at $11.67 1/4/bu, a loss of 16 cents on the day.

The canola market was not as fortunate while failing to hold above $482.20/mt, the 61.8% retracement of the move from the December 2008 low of $353.10/mt to the July 2012 high of $691.10/mt, as seen on the attached continuous weekly chart. Tuesday's close was at $475.50/mt, a loss of $18.10/mt on the day. As seen on the chart, near-term support may lie at $464.60/mt, the 67% retracement of this same uptrend.

Despite the uncertainties that face the market in the upcoming weeks, canola continues to drift lower with little concern. Noncommercial traders continue to liquidate positions, while producer selling on the way down is also suggested to have had an impact on Tuesday's market. Cash basis continues to weaken, with the Vancouver bid widening $10/mt to $50 over the November during last week's trade, while widening a further $10 to end at $40 over the November in Tuesday's trade.

A Bloomberg report Tuesday suggests that Oil World is expressing concerns over Canada's late crop, viewed to be two weeks behind normal, and the race to mature before the first frost. Producers are also showing increasing concern, with one Internet chat group discussing the potential for cold overnight lows later this week in eastern Saskatchewan, although forecasts seem to suggest lows of 7 to 9 degrees Celsius for this region.

The next several weeks will keep many involved on the edge of their seats. As seen in the lower study of the attached chart, the canola market is deeply oversold, which is a favorable situation for noncommercial investors to re-enter the market which could result in a sudden move higher.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

(ES)

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