The blue line on the first study shows the new-crop Nov21/Jan22 futures spread. This spread has weakened $0.50/mt so far this week to minus $3.30/mt, the weakest spread seen this calendar year, with the January contract trading over the November. This signals a growing bearish view of fundamentals held, although this spread is calculated at roughly 25% of full commercial carry, which continues to be viewed as bullish overall.
It is interesting to note that on this date during the past five years, this new-crop futures spread ranged from minus $4/mt to minus $6.60/mt, averaging minus $5.42/mt. This is not significantly different from the current spread, while the March AAFC supply and demand tables were forecasting new-crop ending stocks ranging from 1.1 million metric tons to 3.3 mmt over this five-year period. In comparison, AAFC is currently forecasting 2021-22 stocks to remain unchanged at a very tight 700,000 mt or 3.5% of use, despite a 4% increase in seeded acres and a 1 mmt or 4.7% decrease in forecast demand (crush plus exports).
One signal of ample demand in new crop positions is the current Canadian Canola Board Margin Index, which is currently showing a return of $61.56/mt against the old-crop May contracts, while reported over $150/mt in new-crop positions.
Futures will likely have to do some heavy lifting in order to encourage new-crop selling after prices currently being realized in old-crop delivery months.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
(c) Copyright 2021 DTN, LLC. All rights reserved.