Oilseeds short-term bearish, long-term bullish

(Resource News International) — Oilseed futures, including canola and soybeans, will likely see short-term weakness, but will be stronger in the longer term, according to technical analyst David Drozd of Ag-Chieve Corp.

Presenting at the Canadian Wheat Board’s annual GrainWorld conference in Winnipeg on Monday, and pointing to a number of equity, currency, and commodity charts, Drozd said his analysis was indicating a nearby test of support in soybeans and canola, with prices possibly moving to their lowest levels in over a year.

In addition to the technicals, he said, oilseed futures should also be pressured in the near term by large global supplies, the strengthening U.S. dollar, and a softer tone in crude oil.

For soybeans, he said the nearby CBOT (Chicago Board of Trade) futures could decline to US$7.77 per bushel, a price not seen since December 2008. The May CBOT soybean 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.

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