New Crop Canola Needle Top?

[errolanderson]

Hi all . . . know that I may be hit with
barbs 'n spears with these ongoing
caution notes . . . but here goes:

Take a look at the Nov canola chart.
This may be the needle peak of the
market. IMO, the only reason new crop
canola is anywhere near this high is
because of the squeeze in old crop right
now. Once the old crop squeeze is over,
where will new crop drop to? Old support
lines on Nov suggest possible pullback
to $540, then $520/MT, but this may take
days or weeks depending on spring
weather and the health of stock markets.
New crop canola cash market appears to
be a huge pricing opportunity.

An opinion for what it's worth . . . .

Errol

[bucket]

Errol

Does it not make sense to keep the premium in the market until the experts know there is 18 plus million acres in the ground.

If they drop the canola price too early, guys don't pick up the outrageously priced bags of canola seed, and seed something else. Mainly, as you have said in another thread, undervalued durum or oats.

And given the soil maps, it would be more likely to go cereals from a risk view.

[wd9]

Bucket, with wheat and pea seed at 15 buck
a bushel is canola seed really that
expensive?

Errol, Are you saying the market is going
down on the nearby quite shortly?

[hobbyfrmr]

Bucket, it does not have to make sense. The
market is always right. Errol is just highlighting
that, at this point in time, a farmer can lock in a
very good price for new crop canola. A farmer can
do this, or else guess/hope for higher prices.

[bucket]

hobby

You and errol are right but these soil moisture maps have me worried about how much to price. True, these are great prices.

[errolanderson]

Good point bucket . . . My view is that
canola has simply bought the acres
already. Soybeans may be a different
story. Goldman Sachs remains quite
bullish beans.

But your comment would suggest that a
canola price setback may be shallow at
best, until weather and seeding
conditions are better known. That could
very well be the case.

[errolanderson]

wd9 . . . . Today's drop wasn't very
convincing. May canola remains very well
supported and the squeeze could push the
nearby higher yet. For the bulls' back
to break, canola would have to drop at
least $15/MT or more quickly IMO. That
hasn't happened yet.

But not so sure about new crop right
now. Record acres and really no need for
higher fall/winter prices IMO. To me,
the Nov chart is now showing some
defensiveness.

New crop has accelerated so quickly of
late that it may take more than a $15/MT
drop to break the chart uptrend. So
could Nov canola drop $15/MT sometime
soon? Why not and the bull is still
alive.

Sensing potential increase in price
volatility soon.

Errol

[charliep]

Interesting article in AgWeb.

[URL="http://www.agweb.com/blog/Current_Marketing_Thoughts_140/put_your_risk_manager_hat_on/"]put your risk manager hat on[/URL]

Regardless of your market opinion, hopefully everyone has a little voice in side that reminds them prices are $14/bu plus old crop and $13/bu plus new crop. Perhaps voice is your spouse. I like Errol's ideas about puts. Good insurance that you can hope you will never use.

[crusher]

Once a producer gets to say 1/3 sold cash, what
put options should one pursue? Beans and
canola are tracking fairly close, nov bean puts?

[Kodiak]

Not sure if the studies will come through with the link below. (wow-its a long one!)

But nothing here looks real dangerous to me. The stochastics are perhaps turning down-we'll have to see what happens with today's close. But even the RSI at 78 is lower than its been for most of the last 2 months.


http://www.barchart.com/chart.php?sym=RSX12&style=technical&template=&p=DO &d=X&sd=&ed=&size=L&log=0&t=BAR&v=2&g=1&evnt=1&lat e=1&o1=&o2=&o3=&sh=100&indicators=BBANDS%2820%2C2% 2C10066431%2C3227936511%29%3BSMA%2818%2C%29%3BSTOS L%2814%2C3%2C16711680%2C153%29%3BRSI%2814%2C0%2C10 0%2C10079487%2C10040064%29&chartindicator_1_code=B BANDS&chartindicator_1_param_0=20&chartindicator_1 _param_1=2&chartindicator_1_param_2=10066431&chart indicator_1_param_3=3227936511&chartindicator_2_co de=SMA&chartindicator_2_param_0=18&chartindicator_ 2_param_1=&chartindicator_3_code=STOSL&chartindica tor_3_param_0=14&chartindicator_3_param_1=3&charti ndicator_3_param_2=16711680&chartindicator_3_param _3=153&chartindicator_4_code=RSI&chartindicator_4_ param_0=14&chartindicator_4_param_1=0&chartindicat or_4_param_2=100&chartindicator_4_param_3=10079487 &chartindicator_4_param_4=10040064&addindicator=&s ubmitted=1&fpage=&txtDate=

[tipsy]

The interesting chapter of the 2010/11 canola crop is... how much unpriced canola is left on the farm that's available for the industry to use between now and when new crop is available??? My guess would be right around 10%??? If my number is close, will this be enough to keep everyone supplied?

[Kodiak]

Crap. I think I messed up everybody's screen. Joe, can you turn the url I posted into a working link and replace it on my post?

Sorry everyone......

[tipsy]

correction should be 2011/12 crop not 2010/11.

[cottonpicken]

Resistance is 14.50 in beans.

[errolanderson]

crusher . . . we have been purchasing
November 570 puts fairly aggressively
between $20 to $22/MT.

$570 strike - $21 premium = $549/MT
($12.45/bu) plus or minus your fall
delivered basis.