Canada Markets

Grains Entering a Period of Seasonal Weakness

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Minneapolis hard red spring wheat is one of the grains and oilseeds which are entering a period of seasonal weakness. The red line represents the weekly trend in the front-month contract, while the blue line represents the five-year seasonal index. Prices tend to increase in the current week, then drift lower into late February.

The notion that to everything there is a season goes back to biblical days, while many may be more familiar with the words of a 1950s Pete Seeger song made famous in the 1960s by The Byrd's Turn! Turn! Turn! (To Everything There is a Season).

While seasonality in grain prices is just one of the six factors studied by DTN in the company's proprietary Six-Factor approach to market analysis, one thing that currently stands out is the period of seasonal weakness we are heading into across the grains and oilseeds.

As seen on the attached chart, Minneapolis spring wheat price tends to reach a high in the current week, while the seasonal index trend would point to a move lower into late February. The overall move would suggest a move from roughly 106.5% of the seasonal average to approximately 95% of the seasonal index or average.

The most active Chicago soft red winter chart points to a move higher in prices during the current week, while an overall trend lower into late February starting in early November. The historical move would point to a move from approximately 104% of the seasonal index to roughly 94% of the seasonal index by the end of the period.

Corn prices also exhibit a similar trend. Corn's seasonal index points to a move higher into the first week of November, with an overall trend lower through late January. This weakening would suggest a move from roughly 102.5% of the seasonal index to roughly 99% of the seasonal index.

Like corn, the seasonal index for soybeans also points to an upward trend into early November, while prices then tend to trend lower over the month of November, moving from 98% of the seasonal index to 94% by late November.

The five-Year Seasonal Index chart for canola also shows that prices tend to rally into late October, before drifting to a seasonal low in mid-to-late December. Prices tend to move from approximately 96% of the seasonal index to 94% of the seasonal index by mid-December.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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