Canada Markets

Only the Demand Side Can Stir the Canola Market

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
@CliffJamieson
January canola is holding between support of the contract's 50-day moving average and resistance of the 20-day moving average. Trade recovered to hold above the 50% retracement of the move from the July low to October high. The second study shows futures spreads weakening on Monday, a bearish signal. The red bars of the histogram on the lower-study shows the noncommercial net-short position increasing for the first time in six weeks, while the blue bars of the histogram above show noncommercial traders holding the largest net-long position in the Canadian dollar seen in 21 months. (DTN ProphetX chart)
January canola is holding between support of the contract's 50-day moving average and resistance of the 20-day moving average. Trade recovered to hold above the 50% retracement of the move from the July low to October high. The second study shows futures spreads weakening on Monday, a bearish signal. The red bars of the histogram on the lower-study shows the noncommercial net-short position increasing for the first time in six weeks, while the blue bars of the histogram above show noncommercial traders holding the largest net-long position in the Canadian dollar seen in 21 months. (DTN ProphetX chart)

Over the past seven sessions, January canola has traded over a narrow $8.80/metric ton range, while Monday's close was $2.30/mt lower, at $461.10/mt, while ending close to the mid-point of this range. Despite significant areas on the Prairies that remain to be harvested under challenging conditions, the second study shows the Jan/March, Mar/May and May/July futures spreads showed signs of weakness in Monday's trade, although remain above support on the spread chart. The nearby Jan/March spread, at minus $9.30/mt, continues to represent a bearish view of commercial sentiment.

The histograms in the lower two studies point to trends that bears watching that also weigh on prices. As of the Oct. 22 CFTC Commitment of Traders report, the noncommercial net-short position in canola (red bars, lower study) increased in size for the first time in six sessions to 61,584 contracts. Delayed harvest has resulted in this group slowly paring their bearish holdings for a period of five weeks but this group is becoming more at ease with the current situation.

The blue bars in the third study shows a sharp rise in the noncommercial net-long position in the Canadian dollar to 33,393 contracts, the largest net-long position seen since February 2018, or close to the largest bullish position seen in close to 21 months. This also represents the largest week-over-week increase seen in a net-long position held in over two years. The potential for the U.S. to introduce another rate cut on Wendy while traders are looking to the Bank of Canada to hold steady are supportive for Canadian dollar trade. 

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

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January canola is holding between support of the contract's 50-day moving average and resistance of the 20-day moving average. Trade recovered to hold above the 50% retracement of the move from the July low to October high. The second study shows futures spreads weakening on Monday, a bearish signal. The red bars of the histogram on the lower-study shows the noncommercial net-short position increasing for the first time in six weeks, while the blue bars of the histogram above show noncommercial traders holding the largest net-long position in the Canadian dollar seen in 21 months. (DTN ProphetX chart) 
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