Old-Crop Canola Sees Supportive Buying
After breaching support from the lowest level traded during the past nine weeks, the old-crop July canola contract attracted supportive buying interest on Tuesday, likely tied to bull-spreading from the November contract. After reaching a low of $690/metric ton low this session, price bounced to close $4.20/mt higher at $701.60/mt, its first higher close in five sessions while also bouncing back to finish above $700/mt.
Today's trading bar formed close to a perfect doji bar or candlestick, with Tuesday's open and close only $0.40/mt apart, a sign of uncertainty or potential harmony between buyers and sellers at current levels. This marks the first trade of the week for canola, with Monday's trade closed due to the Victoria Day holiday weekend across Canada.
Tuesday's daily volume at 18,940 contracts traded in the July was the highest seen in eight sessions, while 20% higher than the four-day moving average, as seen in the first study.
The brown line on the second study of the attached chart shows the July/November contract spread, which closed at $36.60/mt, its highest level seen in more than a month, signaling a growing bullish sentiment for old-crop trade relative to new-crop conditions.
The stochastic momentum indicators show a sideways move formed on the daily chart, having failed to reach oversold territory.
This week we should see the release of Statistics Canada's April canola crush data as well as Agriculture and Agri-Food Canada's latest supply and demand estimates.
A recent change in USDA's estimates saw its forecast for Canada's canola stocks revised lower from 1.040 million metric tons (mmt) to 755,000 mt for 2022-23. AAFC continues to hold on to a 1 mmt forecast for stocks as of July 31, although as of week 41, licensed exports were reported at a volume that was roughly 272,000 mt ahead of the pace forecast by AAFC, while domestic disappearance is reported at a level that is 446,500 mt ahead of the steady pace needed to reach current AAFC estimates.
Cliff Jamieson can be reached at email@example.com
Follow him on Twitter @Cliff Jamieson
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