Canada Markets

Continuous Canola Price Nearing Long-Term Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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November canola consolidated on Tuesday, after coming within $6.70/mt of testing long-term support in Monday's trade. This continuous chart shows canola reaching a low of $437.60/mt in January 2015, $437.10/mt in April 2015 and a $435.50/mt low during the month of March 2016. (DTN graphic by Nick Scalise)

As seen on the attached the long-term continuous active monthly canola chart, prices have remained above $435.50/mt since January 2015, while Monday's low has come within just $6.70/mt of testing this floor.

The long-term chart shows price dipping to a low of $437.60/mt in January 2015, $437.10/mt in April 2015 and even lower to $435.50 in March 2016, as indicated by the horizontal red line on the chart. During this period, trade reached a high of $544.60/mt for a total range of $109.10/mt over this 19-month period.

Prior to testing this level, other levels of technical support must first be tested. This includes: 1) Psychological support at $450/mt; 2) $447.80/mt which is the 61.8% retracement of the move from the September 2014 low to the May 2016 high; and 3) $439.70/mt which is the 67% retracement of the same uptrend.

Despite what could be a large crop on the way, support could come from both the commercial and noncommercial side of the market as prices near long-term support. Tuesday's ICE Canadian Canola Board Margin Index was reported at $122.20/mt, within $1/mt of the day-ago, week-ago and month-ago levels reported, while close to $60/mt higher than the year-ago index. Attractive crush margins have at least one Prairie crusher continuing to bid the November option price or 0 basis for spot deliveries.

Also supportive is Dow Jones report today which suggests that investors or noncommercial traders remain net-short 40,000 contracts of canola. Any nervousness in the soybean market may lead to nervous short-covering in canola.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(CZ)

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