Today's low in the November canola contract of $472.40/metric ton, now the contract of choice for many buyers in calculating prairie prices, takes us back to a level seen four times in the past 11 months.
In July and August of 2016, the contract reached lows of $472.20 and $472.10/mt respectively. These lows were tested once again when the March 2017 low reached $473/mt and the April low reached $471.80/mt.
The red horizontal line on the attached chart represents this resistance, but will it stop there?
Reasons for concern include:
1) Daily, weekly and monthly stochastic momentum indicators are trending lower, but have yet to reach the oversold level of the chart (below 20%) which suggests that more noncommercial selling may continue.
2) DTN's Five-Year Seasonal Index chart indicates a normal uptrend into the month of June that gives way to a move to a downtrend in prices which results in a seasonal low in early September. A quick look at the last two years shows the November canola future falling by $89.80/mt from the June 15 high, while the November 2015 contract fell by $85.40/mt from the July 2 high.
3) Saskatchewan's weekly crop report shows 56% of the oilseed crop at or ahead of normal growth stages as of June 19. This is unchanged from last week and is only slightly below the five-year average for this week, calculated at 58.3%.
4) As seen on the attached chart, commercials have maintained a neutral stance, with the Nov/Jan spread holding steady at minus $5.50 to minus $6/mt (January trading over the November) since mid-May. As well, new-crop basis levels for November delivery have remained steady for the past two months.
DTN 360 Poll
This week's poll asks how you would describe the crop condition in your area. You can weigh in with your thoughts on this week's poll, which is found at the lower right side of DTN's Canada Edition Home Page. We thank you and welcome your input!
Cliff Jamieson can be reached at email@example.com
Follow Cliff Jamieson on Twitter @CliffJamieson
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.