Canada Markets

Canola's Seeded Acre Trend and 2019

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart highlights the 20-year tend in Canada's canola acres (1999-to-2018), which could be extended to support a forecast for a record 24 million acres in 2019. (DTN graphic by Cliff Jamieson)

A media piece released by Bloomberg on Monday included ideas that canola acres could reach a record 24 million acres in 2019. This is despite the bearish fundamental situation currently facing canola, the growing U.S. stocks of soybeans due to reduced trade with China, as well as the increasing focus on the need to manage rotations.

This forecast, which involves a year-over-year increase in seeded acres of 5.2%, is not out of line, given canola's 20-year trend in seeded acres seen on the attached graphic. While Statistics Canada estimated 2018 seeded acres at 22.8132 million acres, a drop of 0.87% from the previous year, the 5.2% increase to 24 million acres would be just 205,563 acres or 0.9% above the 20-year trend.

The 5.2% year-over-year increase may seem high when compared with the five-year average increase of 2.3%, the 10-year average at 3.7% and the 20-year increase at 3.2%. At the same time, over the past 20 years, seven years saw the annual increase higher than 5%, with the largest year-over-year increase seen in 2003 when acres jumped 22.2% year-over-year.

Trade in the November contract has remained range-bound since late September, holding between a high of $503/metric ton reached on Sep. 27 to a low of $488.60/mt reached the week of Dec. 17, a narrow range of $14.40/mt. At the time of writing, the November contract was reported at $497.70/mt, down from a session high of $499.90/mt.

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The sideways move seen on the November 2019 chart is not unlike a long-term look at the continuous November contract chart. Since November 2016, trade in the continuous November contract has ranged from a high of $532.60/mt to a low of $471.80/mt, a $60.80/mt range, while five of the past six monthly closes are seen close to the mid-point of this range, calculated at $502.20/mt.

Of interest, the November 2019/January 2020 futures spread is trading at minus $5.20/mt on Tuesday (January trading over the November), which reflects roughly 40% of full carry and points to a neutral view of market fundamentals on the part of commercial traders. The notion of increased acres has yet to result in a bearish sentiment in new-crop trade.

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

Follow him on Twitter @CliffJamieson

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