Canada Markets

At a time when canola's five-year seasonal chart is suggesting prices should be near the end of a sideways movement which has been in place since September and begin its seasonal move higher, the Vancouver cash basis is weakening and pointing to potential concerns in the export trade.

The cash basis against the January future seen on the attached chart by the red line in the lower-right corner plunged at the end of last week, with Vancouver cash weakening or widening $5/mt on Thursday, Nov. 21, while a further widening of $2/mt was reported on Friday, Nov. 22. This comes at a time when cash basis on the prairies is extremely wide; with my calculated prairie basis which includes available online bids averaging $36.16/mt under the January, with levels ranging from $20 under to more than $50 under the January. One year ago, this average cash basis was recorded at $1/mt over the January future, with the most aggressive cash basis on the prairies indicated at $15/mt over.

The five-year seasonal chart (not shown), indicates a five-year seasonal low for the nearby future in the first week of December, while gaining 10% to reach its first of two peaks in the last week of February, at 104% of its seasonal index. Could this seasonal trend be in jeopardy with markets indicating a weakening in cash trade while many in the trade are expecting a further boost to production in the upcoming Statistics Canada production data to be released on Dec. 4?

Week 15 exports reported in the Canadian Grain Commission's Grain Statistics Weekly is reported at 2.07787 million metric tonnes, which is 14% below the week 15 exports reported in 2012/13, while the lowest week 15 exports reported since the 2008/09 crop year.

Recent import data from China reports that total rapeseed imports in the January through October period this year are at 2.597 mmt, up 14.43% from the previous year. At the same time, Canada's share has slipped 15.6% from year-ago levels to 1.913 mmt. Australia is reported to have shipped 671,447 mt in this same period, while having shipped no volume in the same period last year.

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

(ES)

© Copyright 2013 DTN/The Progressive Farmer. All rights reserved.