Friday's November canola contract reached a low of $495.20/metric ton, which tested an area of solid support. This included the 61.8% retracement of the move from the June low to July high at $495.20/mt, along with the 20-day, 50-day, 100-day and 200-day moving averages that ranged from $494.50/mt to $497.40/mt. Noncommercial technical buying kicked in that session to result in a close near the upper-end of the day's $13.30/metric ton trading range.
The November contract has reluctantly moved higher since with a $1.10/mt loss on Monday and a $4.30/mt gain on Tuesday, with this week's trading range well within last week's range. Stochastic momentum indicators on the attached chart, as well as the weekly chart, show a mostly sideways move as buyers and sellers search for direction, despite much of the Prairies being dry and a stretch of hot weather ahead.
What is interesting is the dark blue line on the lower study of the attached chart, which reflects the November/January spread. Since July 10 this spread, an indication of commercial sentiment, has weakened from minus $3.20/mt to minus $4.20/mt today (January trading over the November), a sign of a growing commercial bearishness. A similar sentiment can be seen in prairie basis levels, with Monday's spot basis calculated at $6 under the November, while August delivery is close to $32 under and September delivery close to $34 under.
While current levels of demand, both crush and exports, is bound to slow in coming weeks. Producers will get tougher to deal with, given tight old crop stocks and pending new-crop deliveries. Weather has also caused crop stress, and the potential hot weather and lack of precipitation ahead on the western Prairies could take a further toll on the crop.
Commercial traders do have a long-term bullish view of the market, as shown by the March/May spread in inverted territory (March trading over the May).
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