Canada Markets

Commercial Demand Continues to Support Canola Prices

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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March canola reached a nine-day high on Friday while nearing a test of nearby resistance at $471.30/mt. The black line on the lower-study represents the March/May spread, which narrowed $4.90/mt this week to minus $3.90/mt, the narrowest this spread has traded since Nov. 18. (DTN graphic by Nick Scalise)

Demand continues to be a driving force in the canola market. Week 28 Canadian Grain Commission data, which takes us to the end Feb. 14, shows weekly exports of 213,400 metric tons and well-above the volume needed this week to remain on the steady pace needed to reach the current AAFC export target of 9.5 million metric tons. Year-to-date, 5.276 mmt has been exported (licensed exports only), 160,615 mt higher than the steady pace needed to reach the 9.5 mmt target which is 339,000 mt higher than the record set in 2014/15.

As well, crush data released by COPA for the week ending Feb. 17 shows 173,594 mt crushed, up 7.1% from the previous week and the highest weekly crush reported in 10 weeks. Year-to-data crush of 4.445 mmt remains roughly 127,500 mt below the cumulative pace needed to reach the annual crush target of 8.2 mmt, which is close to 840,000 mt above the record volume crushed in 2014/15.

Producer deliveries remain supportive. Week 28 deliveries totaled 389,100 mt, a five-week high. Meanwhile, year-to-date deliveries of 9.8694 mmt into licensed facilities are 1.254 mmt above the same period in 2014/15 and 19% above the five-year average.

Despite the current rate of disappearance, commercial stocks remain high, with week 28 stocks reported at 1.4706 mmt, or 25.8% above the five-year average for this week.

Commercial buyers may be far from comfortable, given this week's move in the March/May spread, as seen by the black line on the attached chart, lower study. This spread narrowed from minus $9.20/mt on Feb. 1 to minus $3.90/mt today (May trading over the March), with a move of $4.90/mt this week alone. Cost-of-carry calculations would view this spread as indicating a neutral view of market fundamentals, although is very close to the point where DTN analysis would consider this a bullish signal.

While this contract is trading near the lower-end of the range traded since last August, today's move higher came close to a test of resistance. The 38.2% retracement of the move from the December high to the February low is found at $471.30/mt, while the contract's 20-day moving average is found at $470.90/mt. A move above these levels could clear a path for a further move to $475.70/mt, with additional levels of resistance found between $480 and $490/mt.


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