After months of misery, it has been a mighty March for canola so far.
Since March 1, the May contract for the oilseed has moved up nearly $50 per tonne on the Intercontinental Exchange, including a gain of $19.70 during the week ended March 21.
In the current month, there were only five days when the contract ended in the red, including March 21, when it hit resistance from two fronts: the 100-day average and surpassing 70 on the relative strength index, to be considered overbought.
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For the week ended March 12, canola’s net short position shrank for the first time in three weeks, fueling support. As well, the start of spring can bring new rounds of buying. Vegetable oils from three continents can also send canola to new levels.
Global palm oil output is set to decline in 2024, while inventories in its two largest producers, Indonesia and Malaysia, are getting smaller. Malaysia’s fell to a seven-month low at the end of February, while production was at a 10-month low. Indonesia is expecting 2024 production to be at least one million tonnes less than 2023. Prices are trading over 4,200 ringgits, the highest in years.
European grain trade group Coceral estimated the combined 2024 European Union/United Kingdom rapeseed crop at 20.2 million tonnes, 1.1 million less than 2023. With most contracts above 450 euros per tonne, prices are at their highest since late November. Heavy rains that hampered wheat production in Europe will likely cause a decline in rapeseed output.
May soyoil at the Chicago Board of Trade traded above the 20-, 50- and 100-day averages over the past week, coinciding with a move by May soybeans above US$12 per bushel. Recent rains in Argentina could lower production estimates for South America’s soybean crop.
Fewer acres and ongoing dryness in the Prairies have the trade expecting less Canadian canola production in 2024-25, along with a 350,000-tonne smaller carryout.
A lot can change canola’s situation between now and harvest time. But if the trade can overcome its own hesitance, canola may enter an ascendent April.
