Canada Markets

Old- vs. New-Crop Canola Futures

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart highlights the weekly change in the May futures (blue bars) and the November futures (brown bars) over the past four weeks, along with the first two sessions for the week of April 5. While new crop canola has fared better in recent weeks, attention has turned back to front-end supplies this week. (DTN graphic by Cliff Jamieson)

If you are of the belief that either old-crop or new-crop canola is not seeing the attention it deserves, either because of the extremely tight old-crop stocks or the dry conditions faced by Prairie producers ahead of spring seeding, it seems the answer is to wait a week for the pendulum to swing.

New-crop November reached a high of $638 metric ton (mt) in the week of March 8. Both old crop and new crop achieved similar gains over this week, while the November lost $29.50/mt over the following two weeks, which compares to the $49.60/mt loss realized in the nearby May contract.

As seen in the week of March 29, old crop and new crop diverged, with a loss of $10.70/mt on the front end and a gain of $14.10/mt for the closest new-crop contract.

After just two sessions in the week of April 5, the spotlight is back on old-crop supplies with the May up $44.30/mt, which compares to $7.60/mt for the November contract.

A look at futures spreads would also support the front-end trade as signaling the most bullish signs. The April 6 May/July spread strengthened to a $50/mt inverse during the session, close to its strongest inverse of $52.60/mt reached on March 15. This compares to the three-year average spread or carry of minus $7.20/mt.

This compares to the current Nov/Jan spread of minus $1/mt on April 6, after reaching inverted territory this session, a weak carry that signals a bullish view of fundamentals and compares to the three-year average on this date of minus $5.13/mt.

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