November 2021 Canola Reaches new Highs
Not to be outdone, the November 2021 canola contract has reached a fresh contract high in each of the past four sessions, and five of the past six sessions.
The move bears watching, with the Nov. 18 trade resulting in a $0.10/mt gain to $525.40/mt, with the gain on the daily chart falling for a second day. At the same time, Wednesday's trade took place both higher than Tuesday's high and lower than Tuesday's low to form an outside bar on the daily chart, a bullish signal that is supported by a higher close this session.
As seen on the lower study, the Nov21/Jan22 spread has narrowed from minus $7.50/mt on Nov. 12 to minus $5.30/mt on Nov. 18, signaling a less-bearish view of new-crop fundamentals. This reflects roughly 40.8% of estimated commercial carry, which could be viewed as neutral overall.
At today's close, the current November close at $525.40/mt seems attractive, while is well-above the $497.90/mt three-year average for the new-crop November contract on this day. At the same time, the old-crop/new-crop spread, or the July 21/Nov 21 spread, closed at $40.80/mt on Nov. 18, which compares to the minus $0.60/mt spread on this day in 2019 and the five-year average of plus $10.70/mt.
While the old-crop rally has pulled new-crop higher, the Canadian industry has yet to see final production estimates and come to terms with the fast pace of movement into export and domestic channels and the implications for ending stocks, which could be much tighter than shown by current government estimates. Continued dry conditions over many areas of the Prairies may also have a bearing on this spread over time.
Given pdqinfo.ca's deferred basis reported for October 2021 delivery, the average bid across the three Alberta regions is $500.95/mt ($11.36/bushel), $494.19/mt ($11.21/bu) across the four Sask. Regions and $496.79/mt for the two Manitoba regions ($11.27/bu), still a great place to start.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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