A lower-than-expected Sept. 1 U.S. soybean stocks estimate saw the November soybean price break higher from its recent short-term range, with support from the commercial and noncommercial side, as the November price moves towards its 200-day moving average and the 61.8% retracement of the move from the contract's June high to September low.
Despite this move, along with unfavorable weather that has the Prairie harvest well-behind normal and at a standstill, the November canola contract failed to match the move realized in soybeans.
Monday's close saw the November contract end $5.50/metric ton (mt) higher, offsetting the losses realized over the past three sessions, while falling $2.30/mt from the session's high and struggling with chart resistance.
As seen on the attached chart, Monday's high struggled with the contract's 100-day moving average at $453.30/mt, a barrier that has limited an upside move over 12 sessions. Monday's trade held within the $10.80/mt range traded over this period, while also struggling with the 38.2% retracement of the move from the contract's June high to September low, as seen at the horizontal red line on the chart at $452.50/mt.
The green line on the first study represents the Nov/Jan spread, which ended unchanged at minus $8.90/mt (January contract trading over the November), representing a bearish view of fundamentals. It remained steady on Monday, indicating a general lack of concern on the part of the commercial trade despite a weekend snowfall that has added further delays to harvest activity on the Prairies.
Monday's move was a result of noncommercial short-covering, with the blue bars of the histogram showing noncommercial traders paring their bearish net-short position over the past two weeks to 89,823 contracts, although remaining close to the record net-short position reported for the week of Sept. 10 of 93,084 contracts net short.
DTN charts show last week's November canola close at the lower 18% of the five-year range, a supportive feature for prices while speculators hold close to a record bearish position. Market watchers will focus on signs of demand, with Canada's August merchandise trade data for August set for release on Oct. 4.
A move above the contract's 100-day moving average and 38.2% retracement line will leave the recent high of $455.80/mt as an upside challenge for the contract, with the next target at the 50% retracement line at $457.40/mt, a level not reached in the past three months.
Cliff Jamieson can be reached at email@example.com
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