Canada Markets

The Spread Between Canola and Spring Wheat

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue bars represent the spread between November canola and December spring wheat in CAD/metric ton on the first trading day of February, measured against the primary vertical axis. The black line with markers represents the percent change in canola acres seeded the following spring, measured against the secondary vertical axis. (DTN graphic by Cliff Jamieson)

According to early Agriculture and Agri-Food Canada estimates, the area seeded to canola will slip lower for the third straight year in 2020. As seen on the attached chart, seeded acres fell by 0.9% in 2018 from the record 23 million acres seeded in 2017, fell a further 8.1% in 2019 while AAFC's January forecast included a 2.1% drop in 2020.

Over the past 20 years, this will be the eighth annual drop in acres, but the longest stretch of falling acres based on Statistics Canada estimates. This is seen by the black line with markers falling below the horizontal purple line, used as a zero line or a point of no change from year-to-year.

AAFC's 2020 estimate of 20.5 million acres would be the lowest in seven years, while representing a gradual change, representing a 2.5-million-acre drop over the three years to the 20.5 million acre forecast for 2020.

This compares to a more abrupt drop in canola acres seeded of close to 4.379 million acres in two years as seen in Statistics Canada data for 1999 to 2001, an 11.8% drop followed by a 22.5% drop.

Given the continuous November canola/December spring wheat spread in CAD/metric tons as of the first trading day each February, shown by the blue bars on the chart, we see the spread declining for three consecutive years, from $226.75/mt in 2017 to $197.81/mt calculated for Feb. 2020. This is the weakest spread seen in five years for this time of year.

At the same time, this spread falls into the top 26.25% of the spreads reported for this period (blue bars) over the past 20 years, which may continue to act as a supportive feature for canola relative to spring wheat.


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