With the downturn in the markets, we must take quick looks at the charts. The question that needs to be examined is... Did the market peak in the fall or are we seeing a simple correction?
Why This Matters
The story of natural gas is not unlike the story of lumber. Both experienced extreme rallies before crashing back down to their previous lows. The all-important question is, will this happen to grains? My short answer is no, but… I believe grains have elevated up to a new trading range. This means the probability of $10 canola is extremely unlikely; however, don’t be surprised if canola goes back down to 15.
As we move into the dead of winter these markets typically drift until a trigger event happens. Last year the market awoke at the beginning of the Ukraine conflict and remained awake until just a few weeks ago. Without a doubt 2023 will have some trigger event. Whether it moves the market up or down is anyone’s guess.
What we want to do is evaluate the chart to see what the trading range is and then design a plan accordingly. Lets use the corn chart below as an example. It’s obvious that corn is trading between 6.50 and 6.75 consistently. What’s not so obvious is the breakout levels. In my opinion the low side is 6.20 and the upper limit is 7.00. This intel can give us a good idea of target levels. Basi
cally your “safe” target zone is the easy one to identity. For canola the easy “safe” would be between 840 and 860. So, what you would do is target 860 for a reasonable sale and in most cases, this would work out to about $20/bu for canola.