February 24, 2010

Canadian oilseed futures see bearish short-term

Oilseed futures, including canola and soy, will likely see short-term weakness, but will be stronger in the longer term, according to technical analyst David Drozd of Ag-Chieve Corp.

Drozd said oilseed futures should also be pressured in the near term by large global supplies, the strengthening US dollar, and a softer tone in crude oil.

For soy, he said the nearby CBOT futures may decline to US$7.77 per bushel, a price not seen since December 2008. The May CBOT soy contract is currently trading at around US$9.69 per bushel.

In canola, Drozd had a downside target of C$353.10 per tonne for the nearby futures if values move below support at C$370, a price also not seen since late 2008.

The May contract is currently trading at roughly C$392 per tonne.

The lower prices go now, Drozd said, the tougher it will be to rally the markets back higher in the spring.

However, he said the longer-term outlook for oilseeds was relatively stronger from a historical perspective, with values entering a new trading range.

It remains to be seen what the lows of the new range will be, Drozd said, but added that the new market conditions would keep prices from returning to the levels of four or five years ago.