Canada Markets

With expectations for record global production levels of oilseeds in 2014/15, the canola market has little support to be found in outside oilseeds. October crude palm oil closed 2.5% lower on Monday, with a move of 56 ringgits lower to end at 2,177 ringgits. The market is influenced by weak data which indicates falling exports and growing stocks, while a recent decline in the perceived odds of an El Nino event this summer and fall has also weighed on prices.

A similar trend can be seen in soybean oil. The December soybean oil chart has been in a downtrend since reaching a high on May 31, 2011, when the contract reached a high of 59.89 cents/lb. Monday's close was 1.8% lower at 35.21 cents/lb, a fresh contract low for the contract. Weekly stochastic momentum indicators are deeply oversold, although continue to grind lower. The continuous active chart would indicate Monday's close to be the lowest since October 2009, with potential support on the weekly chart found at weekly lows of 33.29 cents/lb, then again at 32.65 cents/lb.

As seen on the attached chart, the continuous active crude palm oil chart saw price move below support of the two-thirds retracement of the move from the October 2008 low to the February 2011 high which is at 2,209 ringgits. This level has largely acted to support prices since October 2012. The next level of potential support may be the double-bottom of 2,137 ringgits reached in July 2013 which could be an important test for price should there be further downside.

The lower study indicates that momentum indicators are deeply over-sold and remain susceptible to a sudden change in direction.

Tuesday's USDA report will be watched closely for indications of the expected supply and demand balance for both the United States as well as globally.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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