As supplies of seed dwindle on the Prairies, producers who hold those last few loads of canola will be most interested in the market's potential during remaining weeks of the crop year and the early weeks of the 2013/14 crop year. Pricing orders for $15 per bushel canola may soon be picked up, if not already, while others may be looking for the home-run ball that gets hit clear out of the park on their last loads.
July canola's high reached $638 per metric tonne Friday, coming within $1/mt of the contract high of $639/mt, while backing off to close at $636.80/mt. After Monday's holiday in Canada, when old-crop soybeans gained 16 cents, canola's trade moved through the resistance of the contract high in Tuesday's trade, to settle at $642.50/mt, up $5.70/mt.
While the July canola future has now breached its contract high of $639/mt, old crop strength alongside new-crop weakness has forced the July/Nov spread $9.20/mt higher to close at $94.70/mt in today's trade (not shown), a sign of growing old-crop bullishness relative to new-crop weakness, which is weighed down by favorable prospects for the U.S. soybean crop.
The question now becomes what is the potential for the old crop market? Attached is the continuous weekly chart where we see that $645.70/mt is the 61.8% Fibonacci retracement level of the July 2012 high to the December 2012 low. On four occasions, the week of Feb. 4, Feb. 19, April 22 and April 29, the market traded higher than this resistance level, but failed to reach a weekly close above $645.70/mt. Not only did the market fall back from this level, but aggressive selling also pushed prices well below resistance to end the respective trading weeks. Over the 4 weeks, the close ranged from $8.80/mt below resistance to $15.30/mt below resistance. On average, the weekly close was $12.35/mt below resistance over the four attempts. On a fifth week, the week of March 4, the week's trading range reached a high of $645.50/mt, just 20 cents below resistance, before moving $10.80/mt lower to close at $634.70/mt.
Should prices breach this resistance at $645.70/mt, there are a total of seven weekly highs in the range between $647 to $654.60/mt printed since last September that will provide yet another band of resistance which may pose a challenge to the possibility of further upside gains.
Chart support may be found from a series of weekly lows as well as previous resistance levels turned to support, while major chart support should be found from a trend line drawn from a 2010 low of $360/mt which is currently at $606.50.
Cliff Jamieson can be reached at email@example.com
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