Bathroom break or “Bearly” awake?
Recent events should cause everyone to revive their marketing strategy. While still higher than the fall price the market is signaling the highs are in. Since January the market has drifted lower and is likely to continue this trajectory. The market is desperately waiting for news, yet so far, the news is benign. Everything is priced in. This means the War in Ukraine, the drought in Argentina, the extremely poor USA winter wheat conditions, and the bumper crop in Australia are already accounted for in the markets.
Why This Matters
The market is like water. It will always finds its level.
Bulls and Bears
The Bulls need to be fed. With no real news, the bulls simply run out of steam and fall prey to the bears. If there are no trigger events the market has zero incentive to rally back up because we are already at relatively high prices. Essentially, the market moves into demand destruction mode. We need to figure out the trading range and then act accordingly. We know Canola has a solid trading range between 800 and 880; recently that range has tightened up. Perhaps the range is now between 810 and 837. An excellent price by any standard.
An excerpt from the Grain Navigator (To purchase follow the link below)
At this time of year, a good indication of the strength of canola is the Palm Oil market. Below is a chart that looks at December 2022 ending stocks of Soybean oil, Palm Oil, and Canola Oil in China, India, and the USA. In all three major countries, the oil ending stocks have increased from December 2021. This is significant because it was a shortage of palm oil stocks last year that supported the canola rally. The difference in these Ending stocks is about 600,000 MT. To put this in perspective Canada exported 3 million Metric Tonnes of Canola last year, of which 733,000 Mt went to China. Basically, the increase in ending stocks represents about 20% of Canada’s crush. The picture that is painted is not bullish. This is why $900 on the futures is such a major resistance line.
It’s Go Time!
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