My ‘ancient’ five-year-old smartphone works perfectly fine for everything I need it to do, but the battery stopped holding a charge for more than a few hours. Faced with a $100 service charge for replacing the battery or the option of doing it myself for $20, I opted for the latter. The new battery I ordered arrived after a few days and came complete with a set of all tools needed for the job. One 10-minute video and two hours struggling with the world’s tiniest screws later, and the new battery was in and working great.
However, a tiny cable was inadvertently damaged in the process, leaving my phone with no front-facing camera and no on-ear speaker for phone calls (speakerphone mode still worked fine). Another $20-part later and the camera was working again, but the speaker was still dead.
My easy fix was quickly becoming a massive headache, which is how it feels in the canola market lately.
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Just when it starts to look like things are stabilizing and about to correct higher, the months-long downtrend resumes.
The trend is (not) your friend
The nearby March canola futures hit a contract low of $610.20 per tonne on Jan. 8, but then spent the next two weeks edging steadily higher, gaining about $30 per tonne and settling above the 20-day moving average for the first time in nearly two months. The new battery was back in the phone and there was chatter that the lows could finally be in. Reports of fresh Chinese export buying only added to that optimistic sentiment. However, the canola market has shown a pattern over the past few months of falling lower, stabilizing for a brief period, and then taking another step down. Without outside support, a continuation of that step-down trend would see the market dip below $600 per tonne.
Stochastics
Technical traders have many ways of finessing market data to provide a picture of where values may be heading, with stochastic momentum indicators a way of looking beyond the general trends to show when a reversal may be happening. Some of those momentum indicators flashed strong signals that a move lower was imminent just before canola fell off its nearby highs during the week. New lows were not yet established at the time of this writing, but without an outside supportive catalyst, there were more signs pointing lower than higher.
Fundamentals
Domestic crushers continue to operate at near-full capacity, but export demand for canola has been lacking. The reports of fresh Chinese demand were supportive, but it will take more than a few extra cargoes to bring the lagging export pace back in line with the year-ago level. In addition, Canadian farmers are undersold, which means any pop in the local market will trigger farmer selling.
While that may look like a lot of doom and gloom, the third time was the charm with my broken phone and no extra parts were needed. After looking at the situation with fresh eyes, it turned out I’d simply reinstalled the speaker slightly askew during my earlier repair. All the small parts are back working as they should. The fix to the canola market is out there, but what it will take remains to be seen.
