The new-crop November 2018 daily canola contract shows recent highs reached of $505.90/metric ton on Jan. 5 and again at $505.10/mt on Jan. 19. Recent lows were reached on Jan. 8 at $496.50/mt and again on Jan. 17 at $496.40/mt. Price has been trapped within this $9.50/mt trading range for 14 sessions as buyers and sellers search for direction.
Friday's $5/mt trading range resulted in a bullish outside-day trading bar, engulfing the range of trade achieved during the previous day, while the weekly chart (not shown) also points to a bullish outside-week trading bar printed over last week's trade.
Despite these signals, Monday's trade failed to see a test of Friday's high while closing $1.20/mt lower, at $502.90/mt. The blue line in the third study points to light supportive commercial buying this session, with the spread narrowing $.10/mt to minus $5.10/mt, which represents a neutral view of new-crop fundamentals held by commercial traders. At the same time, noncommercial traders took profits at the top end of the range, with resistance at $504/mt, the 67% retracement of the move from the contract's November high to December low. Support was found at the contract's 50-day moving average calculated at $502.20/mt.
The most recent Canada Drought Watch points to "minimal improvement" in southern Alberta, while "long-term drought continues to dominate the southern half of Saskatchewan," which will surely add to concerns in the year ahead. As well, cumulative 2017/18 producer deliveries of seed into licensed facilities is lagging year-ago deliveries slightly, despite current government estimates which forecast 2017/18 total supplies to be almost one million metric tons higher than estimated for the previous crop year.
The spot average prairie basis, calculated at $19.60/mt under the March contract, is the narrowest basis seen in more than a month and compares to the three-year average of $26.24/mt for this day. This strengthening basis along with lagging deliveries perhaps points to the possibility of ending stocks falling short of the 2 mmt currently forecast by Agriculture and Agri-Food Canada.
Statistics Canada's Stocks of principal field crops report, as of Dec. 31, is set for release on Feb. 5, which could be the catalyst needed to provide direction for this contract.
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