Canada Markets

The canola market is set to abandon seasonal tendencies with bullish outlooks for both canola and rapeseed from both a global and a Canadian perspective. DTN's Five-Year Seasonal Index chart indicates that canola has reached a seasonal high in the current week on average over the past five years. The seasonal high reached during the current week on average over the past five years is roughly 4% above the seasonal average, while the seasonal low has been reached by late September at roughly 5% below the seasonal average.

It is doubtful this scenario will play out in 2015, with a combination of lower acreage and yields resulting in a smaller European crop, lower production expected in Australia while Western Canada struggles with continued dry conditions in the western Prairies and temperatures are expected to be much higher than normal over the upcoming days, according to DTN charts.

Growing concerns pushed the November canola crop to its highest level since September 2013 on the continuous active chart at $521.20/metric ton on Wednesday, with support coming from both commercial and non-commercial buying interests. Support is also coming from the U.S. soy complex, with heavy rains in the U.S. Midwest delaying final planting efforts, including second-crop acres which are not planted due to delayed soft red winter harvest, while concerns are being raised that excessive rains could take a toll on the growing crop.

Today's Fundamentally Speaking column from DTN Contributing Analyst Joe Karlin suggests that what was once believed to be a 500 million bushel carryout for U.S. soybeans in 2015/16 (or higher), is now expected by many in the trade to be closer to 400 mb. Just the same, Karlin suggests it is possible for the U.S. to have the highest stocks and stocks/use ratio in ten years. As well, Karlin indicates that projections for 2015/16 world stocks and world stocks/use of the major oilseeds are currently estimated at levels which would make them the highest in history.

The attached chart shows the percent change between the June monthly close and the July monthly close on the November contract over the past 15 years. In nine of the 15 years, the November contract closed higher in the month of July, gaining an average of 6.6%. In the six out of 15 years which ended lower, the average month/month loss was 7.7%. Across the entire 15 years, the November closed .9% higher in July.

Today's high came within $.10/mt of testing Fibonacci resistance at $521.30/mt on the continuous active chart, while Fibonacci theory would suggest that a sustained close above this level could possibly lead to a further move to $552.80/mt.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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