Canada Markets

It was a difficult week for oilseeds, with canola being no exception. On June 25, Statistics Canada released its June preliminary estimates of field crop areas. Canola acres for Canada were reported at 19.738 million acres. This is lower than the 21.531 ma seeded in 2012, although end-users breathed a sigh of relief with an improvement over the 19.133 ma that had been reported in the March planting intentions report.

On June 28, the USDA released both its 2013 planted acreage report, as well as the June 1 stocks report. Despite a reported planted acreage of 77.728 ma of soybeans being slightly lower than trade estimates, it was in fact higher than the USDA's March projections and higher than the 2012 seeded acreage. It is in fact a record acreage. November canola closed down 23 1/4 cents in today's trade, capping off a week which saw prices decline 21 1/2 cents.

The weekly chart for November canola (not shown) shows signs of weakness starting the week of May 27. First of all, the high that week, at $576.60/mt, failed to challenge the February high of $577.60/mt. The following week of June 3 saw the weekly trading range engulf or encompass the trading range of the previous week by a fair margin. This is called an outside week or an outside bar, and signals a sign of exhaustion in the market. The trading bar was also accompanied by higher-than-normal volume, which is another factor that points to the reliability of the signal.

After sideways trade since that time, prices experienced four consecutive daily declines this week as indicated on the attached chart by the red candlesticks. In the move lower, support has been broken at $546.70/mt on June 26 and at $535.60/mt on June 28. These levels represent the 38.2% and the 50% retracement levels of the move from $488.70/mt in November 2011 to the high of $582.50 reached in July 2012. These breaches of support were also done on high volume days (not shown) which is can be viewed as a measure of the "enthusiasm" of sellers.

While daily momentum indicators are shown on the chart (second study) a more reliable indicator would be the weekly version of these indicators (not shown). They currently remain in a downtrend and show no sign of turning higher, indicating momentum remains to the down side.

Short-term support may be seen at the weekly low of $528.50/mt, while longer-term chart support at $524.50/mt, the 61.8% retracement of the uptrend discussed, may be the next major test for the contract.

In positive news for the market, the June 28 USDA report reduced the U.S. canola crop for 2013/14. While the March Prospective Plantings report was looking for 1.654 ma to be planted in the U.S., down slightly from the 2012 acreage of 1.765 ma, today's June 28 report pared this acreage to 1.307 ma, a 458,000-acre or 25.9% decline from 2012. The biggest decline was seen in North Dakota, where acres were reduced by 600,000 acres. This may lead to increased export opportunities into U.S. plants for Canadian exporters.

In other positive news, DTN Senior Ag Meteorologist Doug Webster is calling for an end to the weather pattern across the Prairies that left many areas with excess moisture in recent weeks. While heat is badly needed to advance this crop, warming is to continue on a daily basis across Alberta and Saskatchewan next week to the point where record high temperatures could be achieved by the end of next week.

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

(ES)

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