Selling canola

[lesm]

I spoke to a marketing guru a while back and he was surprised that I do not hedge any canola for fall delivery or that I do not sell any canola in the fall. Did some research on canola prices and here is what i found. In the last 40 years, 75% of the highest prices were obtained between Jan and July of the calender year, in fact 1/3 of the time the prices were the highest in April/May. There was never one month in 40 years where October was the highest (cash prices only- hedging could change this info). Interesting facts!

[TOM4CWB]

les,

This seems to sneak earlier each year... but weather still drives April highs.

[charliep]

I would have to look at the numbers but would be surprised if that was the case every year. Would not be surprised if most years.

A couple of other things may create a canola market that pays carry plus.

Strong demand that creates a vacuum for canola right through the crop year. Early movement of canola off the combine to pay bills/generate cash flow in some weird sense is like a symphon. Once the water starts flowing (canola deliveries/export sales to countries like China), it carries on right through into the winter and spring. This export and crush pace have supported strong canola prices over time in spite of large crops.

The other issue in the last 10 to 15 years has been Brazil and Argentina (haervest March to June). One of the few crops in the world where there is a major harvest period counter cyclical to North America. Weather issues (perceived and real) impact prices over the winter/early spring.

Suspect if you included spring and summer pricing opportunities prior to harvest, your conclusions might be different. Having said, every crop year is unique.

[fjlip]

Example last Jan to June, prices were in a narrow range, only broke out in Aug. That was the year to store for 12 months and make 50%. China demand seems to be the driver lately, weather is crappy in a few places. If conditions are poor here in 2011, look out! Canola will be premium, if 20mil acres turnout look out the other way.

[RichFarmer]

Did your research include the prices you could have sold for had you forward priced some canola in say April and May for fall delivery ?

[lesm]

No it did not.