Canada Markets

With the soybean market threatening to move lower as the U.S. passes the torch to Brazil as the supplier of choice for the upcoming months, one has to question the potential for the canola market to avoid a further slide, given a weaker tone in the soybean market. Today's close was perhaps encouraging, with March beans down 16 1/4 cents and canola down $2.60 per metric tonne, although selling may intensify as support levels are taken out.

Should the $421/mt March contract low be breached, the monthly continuous active chart indicates potential nearby support in the $412 to $415/mt range. The $415/mt represents the July 2010 monthly low, while $412/mt represents the 66.7% retracement of the move from the 2005 low to the 2008 high.

Should these levels be breached, support from the 2009/10 monthly lows in the $365.20 to $370.50/mt range, as shown by the lower parallel black lines, may be the lower limit for the move in canola, nearly $54/mt below today's market.

It's important to consider that Canadian ending stocks in 2009/10 were actually lower than expected in the current year. July 31 2010 ending stocks were 2.749 million metric tonnes, as compared to the 3 mmt forecast released by Agriculture and Agri Food Canada for 2013/14. With the crop year nearly half over, both exports and domestic crush are behind the pace to meet the 3 mmt target, so the 3 mmt target could easily be understated.

Barring harvest issues in South America, producers may want to consider cash sales or consider downside protection on uncommitted stocks.

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

(ES)

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