This week's easing of concerns surrounding the state of the 2014 soybean crop resulted in a loss of 25 cents/bu. over the week in the November soybean contract, while the International Grains Council data released yesterday acted as a reminder of the bearish situation hanging over the entire global oilseed market. The Canadian prairie crop tour pegged the canola yield at 34.3 bushels per acre, well below last year's estimated record of 40 bpa, but on par with the 2009 to 2013 five-year average of 34.2 bpa.
Canadian dollar weakness remained a supportive factor this week, limiting the downside move of the canola futures. The September Canadian dollar lost more than three-quarters of a cent this week, despite the fact that non-commercial traders have held a net-long position for each of the last five weeks, a position growing larger each week. Should this group give up on playing the Canadian dollar from the long side, selling could intensify and lead to a further move lower.
This week's action on the November contract is viewed as bearish, with the November contract closing $8.20/mt lower over the course of the week at $434.30/mt. This week's low remained above last week's low of $429.10/mt, although continues to push towards critical support at $429.90/mt, which reflects the 66.7% retracement of the move from the February low of $392.80/mt on the May contract to the May high of $504.10/mt reached on the July contract, as shown on the attached continuous active weekly chart. A move below this support level could indicate a further move lower to the next weekly low of $419.20/mt.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
The lower study on the chart indicates a weakening of the Nov/Jan spread (black line) pointing to a growing easiness with the crop's prospects in the near future. Since the week of July 7, this spread has widened from minus $2.90/mt (January over the November) to today's close of minus $4.10/mt.
Weather remains the key, with August being the critical month for pod-filling while the canola crop may be as much as one to two weeks late and will require supportive conditions to bring this crop home.
Wishing all Canadians a safe and enjoyable August long weekend!
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Cliff Jamieson can be reached at firstname.lastname@example.org
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