Canola Breaks Lower
May canola finished lower for an eighth session on Tuesday, closing $10.20/metric ton (mt) lower at $757.60/mt. Daily volume in the May rose marginally to 17,859 contracts, close to the lowest daily volume seen in five sessions.
Today's move saw the Sept. 6 low of $766/mt on the continuous active chart breached, which brings to an end the sideways trade seen since late June with a range of $145.90/mt. Today's low of $757/mt was the lowest seen since June 2021, or approaching two years.
The most recent CFTC statistics as of Feb. 21 shows noncommercial traders continuing to sell canola. The noncommercial net-short was reported to increase for a third week to 49,928 contracts, the largest net-short seen since June 2020.
At the same time, it is interesting to note that the size of the noncommercial short position has grown to 69,669 contracts, the largest noncommercial short position reported since March 10, 2020. The last time the short was reported this large, the nearby May contract traded at $460.90/mt. The CFTC remains two weeks behind in its release of data, which will include further speculative selling.
The continuous active chart shows potential support at $729.90/mt, which represents the 61.8% retracement of the move from the May 2019 low at $427.50/mt to the May 2022 high of $1,219 mt.
A breach of this support level could lead to a search for support, with potential support from weekly lows starting at $656/mt, then $628/mt, then $593.40/mt and $552/mt, which are all 2021 weekly lows on the chart.
Cliff Jamieson can be reached at firstname.lastname@example.org
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