Seasonal tendencies are just one of the six factors studied in DTN's Six Factor approach to market analysis. This study focuses on the seasonal patterns which affect a commodity's price trends, based on the assumption that history repeats itself or "rhymes". On its own merits, this study can pose challenges for marketers given that no two years are really alike; instead, DTN chooses to use this study as a confirmatory factor and look for signs of convergence/divergence between the current trend and the five-year average price trend.
This could prove to be the year where past trends are deemed irrelevant from the perspective of markers. India is seen to be recovering from two consecutive drought years while prairie producers have responded to last year's record prices by boosting seeded acres. This week, Statistics Canada estimated this year's lentil production at a record 3.234 mmt, up 36.3% from last year, 66.1% higher than the five-year average and 105.5% higher than the 10-year average.
As seen on the attached chart, large green lentils delivered to Saskatchewan plants have increased an average of 38.8% between Aug. 1 and week 41 which is the second week of May. Over the past five years, the average Saskatchewan producer bid has ranged from 23.3% lower over this 41-week period in 2011/12 to 95.9% higher in 2015/16.
As seen on the short green line representing the 2016/17 price trend, the bid for No. 1 large green lentils has improved from mid-August lows to $45.94/cwt. Harvest quality will play a huge role in upcoming weeks as we dive deeper into the crop, with Saskatchewan Agriculture reporting 21% of the lentils harvested as of Aug. 22, which compares to 53% harvested this time last year and the five-year average of 27.2%.
Also seen on the attached chart is that the red lentil price has increased an average of 24.9% between week 1 and week 42, or roughly the third week of May. This ranges from a 6.3% drop in 2011/12 to a 47.2% increase in price seen in 2014/15. The short red line represents the 2016/17 trend which has also seen price increase slightly from mid-August lows.
Cliff Jamieson can be reached at email@example.com
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