Errol - comments

[bucket]

This has been a good week on the canola markets.

Has it reached resistance?

Are we due for a pullback?

What should we be sold into new crop?

And some strategies to cover this, would be?

Its just info from another source that helps make more informed decisions.

I think they are seeping bins out at these prices, so new crop may have to be at 13 plus to get the grain off the combine to keep the crush plants operating.

[errolanderson]

Before opening my big mouth, these comments are an opinion and (as you know) markets can quickly make me look like a donkey.

bucket . . . this rally stems from the strength in crude oil. Crude has made amazing gains of late which has encouraged risk-on commodity fund buying. This buying fuel found its way into the U.S. soy complex. With funds in . . chart technicals turned bullish.

Like mallefarmer eluded . . . its the U.S. funds that are unpredictable and can push the market around. They're the wild card.

Realize there are tight supplies, but current canola strength is from hopping-the-back of bean market. Soybean exports to China have been excellent, but the inclusion of Argentina weather problems is a stretch (IMO). Sources in Argentina suggest a massive crop is on-its-way.

Canola is striding higher with March possibly taking a run at $640/Mt. Might happen, might not. All China has to say it 'cancel a bean order' and soybeans will be down 50 cents in about 10 seconds and the price party is over for a spell. But the funds may not be finished just yet.

Believe this rally may have legs into mid Feb . . . would be surprise if it lasts longer. (This is where the donkey part kicks in). But technicals are now 'sounding the alarms' of being overbought.

And China will switch to South American beans soon. Demand for U.S. beans will be cut.

So where is old crop canola going right now? Funds are the drivers of soy market and the media is riding shotgun with their weather headlines.

This market may go far higher than expected, but that will depend on when the funds eventually jump ship. But the higher its goes, the nastier the selloff (when it occurs).

New crop is tough to get a handle. Would like to see how PUed growers are at growing canola this spring first. Suspect acres may not be down that much . . . (another donkey statement).

Like Charlie stated, you have to pull the trigger first to capture profits.

To me, this is a bit of a gift rally (thanks to the risk-on crude oil surge and the funds). But markets are always right.

Errol