In Friday's DTN Early Word Grains, DTN Contributing Analyst Tregg Cronin noted trade concern surrounding current soybean fundamentals and the current level of January futures prices when compared to year-ago levels. A similar discussion surrounding the notion that U.S. soybean cash prices and futures may be overvalued when current fundamentals are compared to historical data was also seen in Friday morning's Twitter posts, which included a graphic similar to the one attached.
The attached chart shows the average crop year Vancouver cash canola price reported by AAFC in its supply and demand tables, as they relate to the annual stocks-to-use ratio for the 2010-11 through to the estimate for the 2018-19 crop year. The data presented would point to the stocks-to-use ratio as a poor predictor of price direction, until the low single-digit levels are reached.
The tightest grouped data is seen for the 2015-16 through 2018-19 crop years. Over this four-year period, the annual stocks-to-use ratio ranges from 6.6% in 2016-17 to an estimated 12.5% in the 2018-19 crop year (green point, which is based on the latest November forecasts from AAFC. Over this period, Vancouver cash ranged over a $30/mt spread, or from an average of $509/mt in 2015-16 to $339/mt in 2017-18.
As we move to the points on the far right of the chart, the calculated 15% stocks-to-use in 2014-15 resulted in an average price of $489/mt, the lowest average price plotted over this period. The 16.3% stocks/use calculated for 2010 resulted in an average price of $568/mt, a wide range of prices despite a high stocks-to-use ratio.
The lowest crop year stocks-to-use ratio was calculated over this period at 4.2% in 2012-13, which resulted in an average price of $650/mt. Close to it is a stocks-to-use ratio of 4.4% calculated for 2011-12, leading to an average Vancouver cash price of $601/mt. The lowest, single-digit stocks-to-use ratios led to the clearest signal for price direction over this period.
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Cliff Jamieson can be reached at email@example.com
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