Canada Markets

November 2014 Canola Trends Lower

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
@CliffJamieson
November 2014 canola futures have printed a number of lower weekly highs since trade began in July 2012. Prices have failed to hold above the 50% retracement level of the downtrend which lasted over a year. Weekly stochastic indicators in the lower study indicate a move to downward momentum. (DTN graphic by Nick Scalise)
November 2014 canola futures have printed a number of lower weekly highs since trade began in July 2012. Prices have failed to hold above the 50% retracement level of the downtrend which lasted over a year. Weekly stochastic indicators in the lower study indicate a move to downward momentum. (DTN graphic by Nick Scalise)

November canola has remained in a steady down-trend since trade began in July 2012. As seen on the attached weekly chart, prices reached a double bottom in late July and early August 2013 at $474.60 per metric tonne and $475/mt respectively, prior to gapping higher the week of Aug. 12, 2013, from $488.60/mt to $500/mt.

November prices retraced 50% of the distance from the July 2012 high to the July 2013 low to $525.80/mt, although prices struggled to hold gains over this level in late August/early September and then again in late October. 

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Support for this future may be found at the 38.2% retracement of the most recent rally from the low of $474.60 in early August to the high of $532/mt, which is at $510/mt. The 50% retracement of this same rally is at $503.30/mt, while the 61.8% retracement of this rally is at $496.50/mt, levels which may also be tested for support. Given further weakness, support from the lower limit of the price gap on the chart at $488.60/mt may also be tested.

While the 2013/14 crop is a big one and most likely about to get bigger on paper as of the Dec. 4 Statistics Canada revisions of 2013 production levels, grain handlers show little concern over sourcing 2014 production. A survey of 37 points across the Prairies indicates new crop basis ranging from $27/mt under to $63.50/mt under the November future for September delivery, with the average coming in at $48.22/mt under the November, approximately $12/mt wider than the extremely wide levels offered in today's cash market.

New crop markets may continue to be weighed down under the threat of a boost in global production of both rapeseed production and soybean production in the current 2013/14 crop year. So far, one estimate for the 2014/15 canola crop has surfaced which suggests a rebound in canola acres seeded in Canada of 12% to 22.05 million acres, as forecast by FarmLink in Winnipeg, one more reason for buyers to sit on their hands.

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

(ES)

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November 2014 canola futures have printed a number of lower weekly highs since trade began in July 2012. Prices have failed to hold above the 50% retracement level of the downtrend which lasted over a year. Weekly stochastic indicators in the lower study indicate a move to downward momentum. (DTN graphic by Nick Scalise) 
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