Technically Speaking

Three Vegetable Oils

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Just as palm oil futures encountered resistance this week from a two-and-a-half-year high, March soybean oil broke to a new one-year high and March canola stayed in its sideways formation (DTN ProphetX chart).

Palm Oil:

February Malaysian palm oil ended down 6 ringgits on the week or down 0.2%, a slight show of resistance after challenging its highest prices since February 2017. Plant-based oil prices have been on a bullish tear in the final quarter of 2019 and palm oil has been the undisputed leader of the sector. USDA is estimating world ending vegetable oil stocks at 9% of annual use in 2019-20, a tighter situation than seen in several years. As palm oil prices have climbed straight up since mid-October, it would not be surprising to see at least a longer pause at the 2,900 ringgit level.

Soybean Oil:

March soybean oil closed up 1.37 cents last week, ending at a new one-year high of 32.87 cents per pound. Typical resistance on the way down was found in 2-cent increments, at 38 cents, 36 cents and 34 cents, so it would not be surprising to see similar challenge points on the way up. Noncommercial buying has been an important part of the uptrend in soybean oil so far, and I would not yet consider it an extreme bearish risk, but the positions bear watching. Friday's CFTC report showed noncommercials holding nearly 100,000 net longs as of Dec. 10, the most since the fall of 2017 with 77% of positions on the long side. Technically, the weekly chart remains bullish after Friday's new high and the anticipation of increased purchases from China could be a part of what is driving soybean oil.

Canola:

March canola closed up $2.90 CAD per ton last week at $469.90 CAD, staying near the middle of a sideways range that prices have traded in since May. Technically, the weekly chart for March canola shows a well-defined triangle that would turn bullish with a close above $483.00 CAD. Canada has its own problems with China, which has hurt canola export business and kept prices under pressure for nearly a year. The possibility of a limited trade agreement between the U.S. and China may give canola prices some bullish hope. If not, at least we can say the underlying market for plant-based oils and 82,499 commercial net longs as of Dec. 10 are supportive for canola prices.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

(BAS/CZ )

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