Just as seen in DTN Grains Analyst Todd Hultman's latest piece on soybeans titled the Unsinkable Oilseed, the canola market is sending similar signals ahead of harvest and as we enter a period of seasonal weakness.
In the 25 sessions traded since July 12, the daily close has been reported below psychological support at $500/metric ton only seven times, or 28% of the closes, while ending below the contract's 200-day moving average six times, or 24% of the closes.
Daily lows over this period have also tested support at $492/mt, the 67% retracement of the move from the June low of $472.10/mt to the July high of $532.50/mt, with only one close below this level out of the three sessions that have seen trade move lower.
Today's close at $500 is just slightly below the mid-point of the range traded over this period, which is calculated at $502.40/mt. Last week's close of $506.90 also pointed to a neutral end to the week, with DTN's Five-Year Price Probability chart indicating that the November canola had closed higher that week 52% of the time, lower 48% of the time.
This sideways pattern could continue pending field results. A survey of trade analysts reported by Bloomberg on Thursday points to the potential for an 18.1 million metric ton crop, which when combined with the 2016/17 carryover, would indicate that total 2017/18 supplies would fall short of the demand realized in 2016/17 and that stocks will be rationed this crop year.
As seen in the middle study, traders have remained noncommittal for more than a month, with stochastic momentum indicators failing to reach overbought or oversold levels. The futures spreads in the lower study point to continued light support from commercial traders, with the nearby Nov/Jan spread or carry at minus $4.50/mt. This points to a gradual weakening of carry, or in other words, a less-bearish approach by commercial traders, while points to a neutral view of market fundamentals held by this group.
Cliff Jamieson can be reached at firstname.lastname@example.org
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