Canada Markets

November Canola Breaks Resistance

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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New-crop canola fought with the resistance of its March high over the last two days but broke through the $460.90/mt barrier with a solid move higher today, supported by high trade volumes as seen in the lower study. New crop spreads remain in inverted territory, as seen in the third sturdy, a continued sign of commercial bullishness. (DTN graphic by Nick Scalise)

The new-crop November canola contract reached as high as $460.90 per metric ton Wednesday, a level equal to its March high. It then moved slightly above this level on Thursday, only to meet resistance and be pushed to a lower close. Friday's move of $8/mt saw a close near the upper-end of today's trading range at $465.60/mt resulting in an upside breakout from a $21.70/mt trading range that has largely held trade for close to 16 weeks.

A number of factors in the market supported this move today. First of all was a solid move higher in the soybean oil market, as the United States Environmental Protection Agency released proposed targets for biodiesel, increasing biodiesel targets by 100 million gallons per year to a target of 1.9 billion gallons by 2017. Supportive responses came from both the National Biodiesel Board and the American Soybean Association, while the soybean oil market gained over a cent per pound in the seven nearby contracts.

Canadian dollar weakness was supportive today, with Canada's economy contracting in the first quarter of 2015, which resulted in selling of the Canadian dollar. While current Bank of Canada forecasts are suggesting a return to a 1.8% growth target in the second quarter, it is a widely held position that these forecasts are too optimistic which may even result in yet another interest rate drop which will create further pressure on Canada's currency.

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Last of all, concerns are mounting over the state of the crop. Crop reports from both Saskatchewan and Alberta showed a growing moisture-deficient area, with growth-behind-normal stages over much of the Prairies. Yet another frost event was seen over the last night, while DTN maps show the five-Day Lows to be below normal through the next five days to June 2 over much of the Prairies, with lowest temperatures seen in the eastern Prairies.

The next target for the November contract, given further strength next week, is $472.60/mt, the 61.8% retracement of the move from the April 2014 high of $515/mt to the December 2014 low of $404/mt on the weekly chart. As well, a range of weekly highs from $474.30/mt to $475.80/mt, a five-week range of highs seen in June 2014 may also act as resistance given a further move higher.


DTN 360 Poll

The new DTN 360 poll looks at Statistics Canada's acreage estimates for 2015 suggesting that eastern Canada will plant more corn and less soybeans than in 2014, counter to the expected move to be made by U.S. farmers. What do you think is the primary driver of this decision? You can weigh in with your response on DTN's poll found on the lower right of your DTN Home Page.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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