Supply management in Canada, introduced in 1972, regulates dairy, chicken, turkey, and egg prices through production quotas, farm-gate prices, and tariffs on imports (up to 300%) to protect Canadian farmers. Supporters argue it ensures price stability for farmers, while critics point to artificially high consumer prices and strained trade relations, particularly with the U.S. and Europe. The Trump administration, for example, has pushed for the removal of these tariffs. Opponents fear that ending supply management could lead to U.S. surplus products flooding the market, threatening Canadian farmers. As tensions rise, especially with potential tariffs on Canadian goods, cheese is currently at the center of the debate. This brings up the question: how will large Canadian producers, such as Saputo Inc. (SAP.TO), fare? In today’s Daily Stock Report, the outlook for companies like Saputo, which have thrived in protected sectors, will be analyzed as they may now face more competition on the global stage. Technically speaking, shares of Saputo Inc. (SAP.TO) have been relative underperformers within the SIA S&P/TSX 60 Index Report, with shares down -17.01% over the past year. Selling has intensified in the last month, with a decline of -9.29%. More importantly, SIA's main coach relative strength continues to show readings in the red zone of the SIA S&P/TSX Index Report, where they are buried deep in the Unfavored zone at position #59. Shares of SAP.TO have been in the unfavored zone of this SIA Report for nearly 8 years, ensuring that no elite SIA practitioners' portfolios are impacted by this underperformance due to the rules-based methodology that prohibit such holdings. For those who continue to hold Saputo Inc. hoping for a rally, resistance now exists at the 3-box reversal level of $24.79, with long-term resistance extending back to 2015 at $25.28, and further resistance at $26.83. Even with a move up or beyond these levels, any significant upward move may face substantial resistance, as indicated by the large oval circle. Additionally, Food and Beverage is an unfavored sector within the SIA Sector Report and SAP.TO has an unfavorable SMAX score of 0/10, a secondary vector of analysis derived from a comparison of SAP.TO versus five other asset classes of opportunity. Like aged cheese, the next level of material support on the point-and-figure chart may lie at the $21.16 level, dating back to 2013, with additional support at $18.42 from 2010.
The next chart is an SIA candlestick chart, scaled with monthly candles for long-term analysis, extending back to 2010 to identify material support at $17. Here, a declining series of highs and lows is visible over the past 10 years, where shares have declined from $40 to $20, making them poor investments even for the long-term buy-and-hold advisor.
There is very little positives within any of these SIA readings from a technical perspective and furthermore the company is potentially in the cross-hairs of President Trump, who while carrying his own tariff hammer is seen as a proponent of free efficient markets, one that Canadian cheese arguably is not.
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