Canada Markets

May Canola Faces Light Selling on Monday

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The continuous active canola chart shows prices consolidating on Monday, following four consecutive lower weekly closes. The second study points to the May/July spread at minus $8.30 per metric ton (mt), representing a bearish level relative to full carry. The histogram on the lower study shows noncommercial traders holding the largest net-short position held in data spanning to the beginning of the crop year. (DTN ProphetX chart)

The continuous active canola chart points to a fourth consecutive lower weekly close in the week March 4 of $4 per metric ton (mt), while losing $34.50/mt, or 7%, over this four-week period. The March 4 weekly close of $4/mt was down sharply from the $20.10/mt shed in the week prior, while the last two days of the week resulted in higher closes that totaled $2/mt in light trade, paring weekly losses.

Monday's modest loss of $1.50/mt took back much of the $2/mt gained in the previous two sessions, although this market is showing signs of stabilizing in light trade.

Last week's low of $448.40/mt found support from the 61.8% retracement of the move from the September 2014 low to the May 2016 high at $447.80/mt, as well as the weekly low of $448.50/mt reached the week of Aug. 29, 2016. A breach of this level could result in a further slide to the July 25 weekly low of $442.20/mt (red dotted line), while the next potential level is found at the 2016 low of $435.50/mt.

Monday's trade shows price stabilizing near the midpoint of last week's trading range. The brown line on the first study shows supportive buying from the commercial side Monday, given a narrowing in the May/July futures spread. This spread closed at minus $8.30/mt on Monday, which represents 72.6% of full carry and points to a bearish view of fundamentals held by commercial traders but perhaps a positive sign in that is $0.50/mt narrower than Friday's close.

The lower study shows the net-short futures position held by noncommercial traders increasing for the fourth straight week as of March 5 to a net short of 46,803 contracts, representing the largest bearish position held since the CFTC began reporting canola last August.


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