Canada Markets

The canola market performed well this week, gaining $4.10 per metric tonne over the week on the March contract, while the March soybean contract lost 42 1/2 cents and March soybean oil lost 3/4 cents per pound. Canola's discount to soybeans, on a Canadian dollar per metric tonne basis, has narrowed from a low of $80.16/mt on Dec. 27 to $54.82/mt to end the week.

As seen on the attached chart, trade over the past six sessions has consolidated in a $15.70/mt range, with today's close just below the mid-point of the range, with potential support at this week's low of $436.60/mt. As seen in the lower study, momentum indicators on the daily chart remain over-sold (below 20% on the chart) and are trending sideways, which may be an indication that the bottoms are in for this market.

Canola's seasonal charts indicate a price increase early in the crop year. In 2013, the nearby future rallied starting in the second week of January to the first week of February. Over the previous five years, prices moved an average of 9% higher from the first week in January to a high in the last week in February.

Canola's spread charts (not shown) indicate a neutral approach by commercial traders, with both the Mar/May and the May/July spreads unchanged from last week. Commercial interest from the domestic crushing industry should remain solid moving forwards, with the Canadian Canola Board Margin Index at $149.26/mt, almost five times the $30.20/mt from one year ago. This calculation acts as a proxy for trends in processing.

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

(ES)

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