Canada Markets

November Canola back above $500/mt

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The November canola contract has gained $8.70/mt in the past three sessions, ending above $500/mt on Wednesday. Today's move tested resistance at the 50% retracement of the move from the November high to the December low at $500.60/mt. The second study shows stochastic momentum indicators moving into a short-term uptrend. (DTN graphic by Nick Scalise)

Since testing support at the November canola's 100-day and 200-day moving average in the last two days of 2017 trade, price has rebounded for three consecutive sessions with today's trade moving higher to close at $500.10/mt, above $500/metric ton for the first time in seven sessions.

Following the Nov. 30 high at $510.60/mt, Statistics Canada released a higher-than-expected production estimate for 2017 that has resulted in an expected sharp increase in 2017/18 ending stocks, which in turn become beginning stocks for the following crop year. Over the four weeks of December, the November contract fell to a low of $490.50/mt, a $20.10/mt or 3.9% drop.

Today's move saw the 50% retracement of this downtrend breached with a high of $501/mt reached, although today's close was just slightly below the $500.60/mt retracement level. Further resistance lies at $500.80/mt, the contract's 20-day moving average, as well as at $501.50/mt, the 50-day moving average.

The blue line on the third study shows the Nov18/Jan19 futures spread at a neutral minus $4/mt (January trading over the November), although note that the January contract did not trade on Wednesday. This compares to the same spread on the soybean chart which is seen weakening, a sign of growing commercial bearishness.

The lower study points to the November canola/November soybean spread, measured in Canadian dollars/mt. Canola has strengthened relative to soybeans, reaching a low of $24.73/mt on Oct. 12 and closing at $47.54/mt on Wednesday.

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

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