Canola Marketing Idea

[TOM4CWB]

Charlie,

I see Nov. 02 Canola traded today over 400/t, what a difference a couple of weeks can make!!!

[charliep]

I agree Tom. I still like the idea (for those that are somewhat comfortable on the yield side) of at some point buying some puts to protect prices on this rally. Selling calls (keeping in mind your experience) is also a good strategy for a disciplined hedger (if I see $10/t - $440 to $450/t Nov futures, I will sell).

An interesting discussion for this winter will be to review marketing strategies and use the lessons learned to improve techniques.

[charliep]

Just thought I would put a note in to keep this thread alive. Interesting times with US markets on fire and the looney taking adive.

[TOM4CWB]

Charlie,

So far this has not been the year to presell anything...

One news letter I recieve from a US think tank believes we are at the 1972-73 historic stage of breakout higher prices for commodities...

They have been saying this since last fall, if the funds and general public jump on this band wagon, this could be quite a ride...

[TOM4CWB]

Tom have you any idea or have you kept a chart on the advantages vs disadvantages of spring preselling has been over the past few years on canola.

If anyone has any record please feel free to enlighten us all on the advantages vs disadvantages.

[TOM4CWB]

Charliep can you give me your best bet on the price of wheat in the next few months. Does it appear to be headed for a historical high.

Anybody else who's got .02 cents worth of wisom please share your knowledge with us.

My wheat crop is looking like 20 bushel or worse, normally 50 bus. or better. Lots of wheat and barley being cut for feed or has had the cows turned into it for pasture. This is Camrose and any direction you want to go from here.

[TOM4CWB]

Kernel,

When I took marketing courses a few years back, the week of May 10th was historically the yearly high in the market over the previous 25 years or so... Dan Hiller and Ken Stickland did the calculations...

The biggest issue was income stability, the cash pricers had higher highs, but lower lows as well, with not a big difference in total income if they both had a good marketing plan...

My two bits on wheat is that there really is no valid way to know what will happen, unless you know the weather...

So much for the CWB's multi-million dollar weather forcasting system,,, it sure did us a lot of good this year...

Wheat stocks are low, but the fall out in the stock market is causing commodities to rally more than they might otherwise...


Kernel, what is your estimate of Canola and non-durum wheat?

Canola, 3.2mmt??

Non-durum wheat for export 8mmt??

[rodbradshaw]

Does anyone have a handle if the big funds are pulling up stakes in the Stock market and heading for the commodities? I know a couple of years ago they got into the corn market and drove it contrary to what the fundamentals indicated. The market eventually returned to where it should have been but they left a lot of carcassses in their wake.

[rodbradshaw]

Tom I'am thinking in the neighborhood of $7.50 export wheat if we done hold it all for domestic use 4mmt this year and 4mmt next year. Domeastic protection price will hold wheat at $6.00

Canola like I said before will hit $12.00 because there isn't any around. And the money funds are like in the commodities already looking to **** and pillage but mostly blunder. I'am glad their playing with someone elses pension money.

[chaffmeister]

$12.00 per bushel canola ($529 per tonne) sounds pretty sweet but remember that canola's only market is to make oil and it must be priced competitively. The market's job right now is to ration demand for canola because as you say, there isn't any around. And the market is doing exactly what it's supposed to be doing - canola crush margins are pretty stinky right now and won't likely get better this crop year and the crushers will react; already starting to hear talk about ADM or Cargill shutting down for the year cuz they won't crush at a loss for very long.

Fundamentally, the road to $12.00 canola is paved with a tight soybean crop and strong competing oil prices, like palm oil - along with next to no canola. We may still see that.

The question you need to ask is "Who's going to pay $12.00 a bushel for canola? There are two correct answers to this:
(1) Someone who can make a margin out of it, and
(2) Someone who is short - that is someone who has made a commitment to supply canola (or the oil), simply needs the canola to satisfy the sale, and will keep bidding higher to get it regardless of the apparent crush economics.

We saw this occur in 1984 when June canola futures hit $722/tonne (a record). Exporters had made sales commitments to Japan, hedged the sale in the futures (therefore were long futures) and would only sell the futures when they bought cash canola from farmers or dealers. The shorts in the futures kept pushing the price higher in efforts to get out, which raised the price (to farmers). Basis levels were also at record high levels. Exporters were happy to pay the high prices because they were hedged anyway.

I guess we could hit $529 per tonne.
However, unlike the stock market during the late 20's or the recent dot-com bull market (technically, there was little difference), I don't see speculators standing in there and paying $529 for canola simply because they believe someone will pay them $539 for it sometime in the near future and allow them their profit. Yes the funds and other speculators may push us there over the next month, but my view is that if we see this kind of price later in the crop year it will be only because someone truly needs the stuff -either (1) or (2) above. And once they cover their needs, the buying stops.

[charliep]

Kernel

I hope you don't mind if I have a little fun and place a bet.

My wager is that canola will hit $7/bu before it hits $12/bu. Current price is $9/bu. Odds are in my favor in that I have $2/bu downside versus your $3/bu rally. El nino/tightenning world vegoil supplies are working in your favor.

The bet is for a lunch. We'll both keep track as long as it takes.

Interested? Again, this is just for fun - I am just as easily wrong as right.

[AdamSmith]

One possible way of getting to $12 canola is via the back door by way of currency changes.

Here’s the scenario,
A bean oil rally back to the 1998 highs, coupled with a significant slide in the greenback and gains in the Yen and Euro.

If the greenback fell by 15% and the Yen and Euro were to experience similar gains and assuming the loonie stays in the .63 -.66 range. Wouldn’t canola and the bean complex enjoy gains based on foreign currency gains and a weakening US dollar, adding more fuel to the rally?