Canada Markets

Will the Oilseed Seasonal Tendencies Help Canola?

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
@CliffJamieson
The five-year seasonal index for canola would suggest a bottoming action in March, as seen by the actions of the blue line, at which time prices tend to trend higher until a seasonal high is reached in early June. In this chart, the red line is the current price movement for canola, as measured on the right hand axis in $/metric tonnes, while the blue line represents the seasonal index, as measured against the right hand side.(DTN graphic by Nick Scalise)
The five-year seasonal index for canola would suggest a bottoming action in March, as seen by the actions of the blue line, at which time prices tend to trend higher until a seasonal high is reached in early June. In this chart, the red line is the current price movement for canola, as measured on the right hand axis in $/metric tonnes, while the blue line represents the seasonal index, as measured against the right hand side.(DTN graphic by Nick Scalise)

Based on canola's tight fundamental situation, aggressive cash basis on the Prairies and a bullish May/July spread, one could assume that the past five-year seasonal tendency for canola will still have an impact on canola prices, despite the bearish forecasts for South American production, as well as a projected recovery in United States production in 2013/14.

The five-year seasonal index for canola, as seen on the attached chart, indicates a "W" formation or double bottom for the canola price index in March, at which time, prices form a base in which to rally to seasonal highs in early June, as shown by the blue line. Prices over the past five years have gained approximately 8% from the March low on the seasonal chart to the June high.

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Over the past five years, from 2008 to 2012, the average move from the lowest close in March to the highest close in June, as seen on the continuous daily chart is $76.84/mt, ranging from a $64.50/mt rally in 2012 to a $113.80 rally in 2008.

While canola may largely be a follower of soybean prices during the upcoming months, bullish soybean fundamentals in the U.S., and the fact that soybean's own five-year seasonal tendencies (not shown) indicate prices to rally from early March to through to the first week of July, are indications that the seasonal move may yet be at hand.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

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The five-year seasonal index for canola would suggest a bottoming action in March, as seen by the actions of the blue line, at which time prices tend to trend higher until a seasonal high is reached in early June. In this chart, the red line is the current price movement for canola, as measured on the right hand axis in $/metric tonnes, while the blue line represents the seasonal index, as measured against the right hand side.(DTN graphic by Nick Scalise) 
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