The March canola contract slid $4.90/metric ton lower on Thursday, while losing $10.50/mt over the past two sessions, taking out the December low as well as the lows reached in September and in July, while reaching its lowest level in six months.
As seen on the attached graphic, trade is nearing a test of potential support from lows reached in June at $483.40/mt (dotted red line) as well as the low reached in March at $480.30/mt (dotted blue line). While not shown, the continuous active chart points to potential support at $482.50/mt, the November contract low reached in September. A break below this area could result in a move to the lower end of a downward-sloping channel on the continuous chart with support at $468.60/mt.
While the daily chart shows prices deeply oversold, the weekly chart (not shown) would suggest that a further move lower is possible prior to prices reaching oversold territory on that chart.
The lower study shows the March/May spread (brown line) closing at a bearish minus $6.90/mt, which reflects roughly 69% of the full carry reported by the ICE Exchange. The blue line represents the May/July spread, which ended at minus $5.10/mt and is rapidly weakening, a reflection of the large build in stocks expected this crop year.
Canola has fared well compared to competing oilseed and vegetable markets when one considers the total move from the most recent high to today's close. While the March canola contract has fallen 7.9% from its Nov. 9 high to Thursday's close, March soybean oil has fallen 8.6% over the same period, while rapeseed has fallen 10.4% from its Nov. 8 high (February contract). Malaysian crude palm oil has fallen 12.4% from its Oct. 30 high to today's close after posting a higher finish in three of the past four sessions.
The continuous active rapeseed chart shows today's low reaching the lowest level in 21 months, or since March 2016, while a EUR8.50 move lower would result in the lowest level reached since April 2015, or 32 months.
Canadian dollar strength has added further to the pressure on canola, reaching a two-month high on Thursday after breaking out of a multi-week trading range in Wednesday's session.
Cliff Jamieson can be reached at firstname.lastname@example.org
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