Canada Markets

Seasonal Tendencies Could Act to Support Canola

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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DTN's Five-Year Seasonal Index chart shows that the nearby November contract tends to reach a seasonal low during the current week, while prices tend to move higher over the five following weeks. The blue line represents the five-year seasonal tendency, while the red line represents the nearby contract weekly close, measured on the secondary vertical axis. (DTN graphic by Nick Scalise)

As seen on the attached graphic, the five-year seasonal tendency would suggest that the front-month canola contract, in this case the November contract, will reach a seasonal low during the current week, while the tendency also suggests a climb in price over the five following weeks, an approximate move of 5% in price.

This move also corresponds to a similar move as seen on the five-year seasonal chart for soybeans (not shown), which tends to reach a seasonal low a week later while the overall price trend is higher through the end of June.

Over the past five years (2010 to 2014), the November canola contract has reached a fall low between Aug. 7 in 2010 and Oct. 7 in 2011. Four of the five years saw fall lows grouped between Sept. 22 and Oct. 7.

By the end of October, the move from the November future harvest low to the high price reached by the end of October ranges from $20.10/mt in 2013 to $106.70/mt in 2010, averaging $54.12/mt or a 12% increase. The length of time until the high was reached ranged from seven days in 2011 to 68 days in 2010.

One factor influencing the seasonal pattern seen in canola is the amount of seed delivered into the system and made available to exporters and crushers at various times of the year. Over the past five years, producer deliveries into licensed elevators have tended to reach weekly highs in fall during a similar period to the seasonal low reached in price.

Over the past five years, weekly deliveries reported by the Canadian Grain Commission in the fall peaked in week 6 in two years (2012 and 2013), in week 7 in two years (2011 and 2014) and in week 9 in 2010. Weekly deliveries in the weeks following the weekly highs in question tend to plunge, with the average deliveries over the four weeks following the high ranging from 15.2% lower to 47.8% lower across the five years, with an average of a 28.3% decline across the five years.

Latest statistics show that producer deliveries this fall reached 345,100 mt in week 6, or the week ending Sept. 13, the highest weekly volume seen this crop year but the lowest volume delivered in week 6 in the 2010 to 2015 period and 14.4% below the five-year average for week 6. Time will tell if reluctant selling will help support the seasonal move to higher levels.


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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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