Canada Markets

Canola Holds Above Contract Low

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
Tuesday's November canola contract low came within $0.20/metric ton of testing the contract low of $437/mt. Noncommercial selling remains a bearish factor, despite momentum indicators that are in oversold territory, seen in the first study, while noncommercial traders hold a record net-short position in canola futures of 83,925 contracts as of Sept. 3, as seen in the third study. (DTN ProphetX chart)

Despite a late harvest and further rain delays forecast across the Prairies over this week, noncommercial selling continues to weigh on canola prices, also despite prices in oversold territory and noncommercial traders already holding a record net-short futures position.

The November contract ended down $0.40/metric ton to $439.40/mt on Tuesday, after reaching a session low of $437.20/mt, just $0.20 away from a test of the contract's May low of $437/mt. Canola diverged from the price direction of the soy complex, palm oil and rapeseed on Tuesday, with a stronger Canadian dollar trade and continued noncommercial selling behind the move.

A look at the continuous active chart would indicate that a sustained move below the $437 low would result in a further slide to the May low of $427.50/mt; the nearby risk would be close to a further $10/mt slide lower. Failing this level, the long-term chart would point to potential support at $408.50/mt and again at $388/mt.

A look at the continuous active chart would indicate that a sustained move below the $437 low would result in a further slide to the May low of $427.50/mt; the nearby risk would be close to a further $10/mt slide lower.

September is viewed as a month of seasonal weakness for canola and a return to widespread harvest work this month could weigh further on prices.

As well, on Sept. 12 Statistics Canada will release its model-based crop production estimates as of Aug. 31. Over the past four years, this report has added between 1.1 million and 1.8 million metric tons to the expected production, over and above the previous estimates released based on July surveys, while averaging 1.425 mmt over the four years. While this is positive news overall, such a result will add to the bearish nature of the market at a time when Chinese trade remains in limbo.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on Twitter @Cliff Jamieson

(ES)

Comments

To comment, please Log In or Join our Community .