Canada Markets

Canola Hangs in There in Sideways Trade

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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January canola consolidated in sideways trade on Monday, despite losses seen across the oilseed complex. The second study shows the January volume declining for three consecutive sessions, with urgency seen waning on both higher and lower closes. The third study shows stochastic momentum indicators drifting sideways, while the lower-study points to narrowing spreads given commercial buying interest as a supportive feature in this market. (DTN graphic by Nick Scalise)

It was perhaps a tough day for global oilseeds and vegetable oil markets. After reaching its highest level seen since September 2012 in Friday's trade, January crude palm oil in Malaysia gave up more than 50% of last week's gains in Monday's trade, creating a bearish island top trading bar on Friday after a gap higher in Friday's trade only to gap lower on Monday. Spreads continue to strengthen while remaining in bullish inverse territory on Monday, while nervous noncommercial profit-taking weighed heavily on prices.

European rapeseed trade on the Paris Liffe market ended lower Monday while reaching a 21-day low, with both daily and weekly price trends pointing lower. The nearby Feb/May spread is seen at a weak carry of 1 EUR, which is also a potential area of chart support, and the weakest this spread has traded since late July. Commercial interest can be viewed as supportive, while once again noncommercial liquidation is weighing on prices.

January soybeans reached a lower low on Monday and has tested the 61.8% retracement of the move from the contract's September low to the October high, while reaching a 20-day low. Soybean oil for December delivery reached a 21-day low on Monday, breaking an upward-sloping trend line which has been in place since the July 28 low, although support was found at the 38.2% retracement of the move from the January soybean oil contract's move from the July low to its October high.

The canola market had some catching up to do, being closed on Friday for the Remembrance Day holiday when soybeans fell 12 cents while soybeans faced further pressure on Monday. Given late-session selling, January canola ended $4.20/mt lower at $509.70, although remained consolidated within Thursday's trading range.

On Tuesday of last week, January canola low neared a test of the 33% retracement of the move from the contract's July low to October high at $500.80/metric ton, while Thursday's move saw a fresh weekly high reached and the most recent overnight session came close to testing this high before moving lower. As seen on the second study, trade volume in the January contract has declined for three consecutive sessions which resulted in a combination of higher and lower closes, signaling a lack of conviction in either direction.

Since Oct. 18, the January canola contract has traded in a range between $500.80/mt and $525.90/mt, a $25.10/mt range, while today's move resulted in a close in the lower one-half of the range, as well as below the contract's 20-day moving average. It's interesting to note that trade is not straying far from the 20-day average, calculated at $512.10/mt, and has alternated from closing below this moving average, to above it and back to below it for five consecutive sessions. Support is also coming from the weaker Canadian dollar trade, which reached its lowest level seen since February in Monday's session.

Commercial buying interest remains a supportive feature as producers strive to harvest the balance of the crop ahead of less favorable weather expected later in the week on the western Prairies. At present, the current pace of crush is on track to reach the 8.9 million metric ton crush estimated by AAFC, while the current pace of exports is not far off the pace needed to reach the current export forecast of 9.5 mmt. That totals 18.4 mmt of demand, which may have to be rationed depending on the amount of crop that doesn't get harvested this fall.

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

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