Canada Markets

A Look at Canola's Price Probability Chart

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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DTN's Price Probability chart for the week-ending July 10, shows the weekly close of the continuous canola chart at $479.50/mt, reaching its highest level since January, while this close represents the 89th percentile of the five-year range. (DTN graphic)

According to a couple of DTN's strategy charts, the canola market is showing late-season resilience at a time of year when this is typically not seen.

While DTN's Marketing Strategies are based around six different factors, from time-to-time we hone in on individual factors for a closer look.

While not shown, the month of July is normally viewed as a period of seasonal weakness as the crop develops and we move closer to new crop. DTN's 5-Year Seasonal Index chart shows a seasonal high reached in late May, with prices trending lower to a seasonal low in late August. The trend in the continuous weekly chart is moving counter to the seasonal trend in recent trade.

The attached chart shows the close for the week-ending July 10 at $479.50/metric ton landing at the 89th percentile of the five-year range. In other words, any marketing based on futures at $479.50/mt falls within the top 11% of the five-year range of futures traded.

The pricing opportunity, however, varies across the Prairies when basis is considered. Using price data, cash basis varies widely across the nine regions of the Prairies on this same day, ranging from $18.32/mt under the November contract in northern Alberta to $34.06/mt under the November contract for western Manitoba. The Peace River basis at $20.41/mt in the narrowest or strongest basis seen in three years, while the basis for southeast Saskatchewan, western Manitoba and eastern Manitoba are all the weakest seen in three years.

When the three most eastern areas are excluded (southeast Saskatchewan, western and eastern Manitoba), we see the range of basis for the remaining six areas from $3.94/mt weaker than the four-year average (2015-19) for the southwestern Saskatchewan region to $1.25/mt stronger than the four-year average for the Peace River region, while averaging $0.81/mt weaker than the four-year average across the six areas.

Cash basis is less friendly in the eastern regions, ranging from $30.49/mt to $34.06/mt under the November contract, or from $6.30/mt to $9.97/mt weaker than the four-year average.


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