June is an interesting month for canola, with the seasonal trend in the nearby futures normally coming to an end during the month. This year looks to be no exception, with DTN's Five-Year Seasonal Index chart showing on average a move into a downward trend in prices which starts next week. So far, this week's move lower in the nearby July contract has totaled $37.30 per metric ton, while the more active November contract has tumbled $32.90/mt so far this week.
Over the past 10 years, from the 2005/06 to 2014/15 crop year, the monthly continuous active contract has only lost ground in the month of June in four of the 10 years, while closing higher over the month in the other six years. This is shown by the blue bars on the attached graphic. The average price move over the past 10 years in the month of June is a $13.34/mt move higher.
The monthly continuous active contract over the course of July fared poorer than seen in the month of June. This chart shows monthly losses in five of the 10 years in question, while the average move over the 10 years was $11.23/mt lower.
In seven of the 10 years, the monthly move in June was followed by a move in the same direction in the following month of July. In four of those years, a monthly move higher in June was followed by a higher close in July, while in three of the seven years, 2009, 2013 and 2014, a move lower in June was followed by an even greater move lower during the following month of July.
Odds of a price recovery in July after a lower price trend in June is established seems low, given the past 10 years. Only once in 2011 was the June loss of $36.90/mt followed by a modest gain of $4.60/mt in the following month.
It's interesting that the stocks-to-use ratio for canola, as indicated by the black line with markers and measured against the secondary vertical axis on the right, have little impact on the late crop-year price activity. The stocks-to-use ratio is reported at 22.5% in 2009/10, the highest seen in the ten-year period, while the active contract increased $43.30/mt during the month of June and a further $42.80/mt in the month of July. Just the opposite is seen in the 2012/13 crop year. The stocks-to-use ratio is calculated at 4.2%, the lowest level seen over the period in question, while the active contract dropped $37.70/mt in June and a further $49.80/mt decline in July.
DTN 360 Poll
This week's poll asks what you think about current forecasts for Canada's ending wheat stocks at the end of the 2015/16 crop year. Will stocks be as tight as is being indicated in current government forecasts? You can weigh in with your thoughts on this week's poll, found at the lower right of your DTN homepage.
Cliff Jamieson can be reached at email@example.com
Follow Cliff Jamieson on Twitter @CliffJamieson
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.