Canada Markets

Weakness in the vegetable oil and oilseed markets was not limited to canola last week. The most active February crude palm oil contract in Malaysia pushed through support of the contract's 20-day moving average in Thursday's trade, while gapping lower in Friday's trade to close sharply lower at 2,562 ringgits/mt. Over the course of the week, the February contract closed 108 ringgits lower, for a loss of 4%. Market watchers will be looking for signals from the upcoming December export data for palm oil, while perhaps expecting the worst due to a declining discount relative to soybean oil. The palm oil future may look for potential support at 2,534 ringgits, the contract's 50-day moving average.

January soybean oil futures closed down .66 cents/lb in last week's trade, a loss of 1.6% for the week to remain in both a short-term and intermediate term downtrend. Friday's trade saw a move below the previous contract low of 39.53 cents, with a fresh contract low reached this session of 39.37 cents before retracing to close at 39.83 cents. Unlike both soybeans and soymeal futures, the forward curve for soybean oil, a series of points which reflect the consecutive closes of each contract, indicates a bearish market structure. The market trades in a carry, with each consecutive contract trading higher than the one previous to it, a sign of comfortable supplies and a lack of concern within the commercial trading group.

In the past eight sessions, February rapeseed trading on the NYSE Paris Liffe has fallen below its 20-, 50- and 100-day moving averages. Last week's trade saw prices reach a 17-week low, with last week's trade ending with an E7.25 loss or a drop of 1.9%. Solid support appears on the February monthly chart from previous monthly lows at E357.25 to E357.75, within E10 of Friday's close.

As seen on the attached continuous monthly chart, canola is following its own bearish path of least resistance, which is sharply lower at present. Over the course of the week, the January contract fell $32/mt, breaking through long-term trendline support as seen on the attached chart, while the monthly chart indicates a loss of $50.70/mt so far this December. The market is facing headwinds from the size of the crop, transportation issues, some degree of panic selling and the general weak tone seen in competing vegetable oils and oilseeds.

The continuous monthly chart does show potential chart-based support at $429/mt and at $401.70/mt, which reflect common retracement levels of the move from the December 2005 low to the March 2008 high.

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

(ES)

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