Canola Discussion

[mcdon]

Recent drop in crude and hog prices underscores the importance of price risk management, energy firms that "got it wrong" have gone broke.Interesting that the one commodity that has a functioning futures market is also the commodity that is providing a reasonable price to farmers.

[charliep]

To highlight, new crop has rallied nicely. Oct./Nov. delivery are both within spitting distance of $10/bu. Don't know if this will prove to be to be low next fall but I do know not a bad place to start new crop pricing.

I asked this question before/never got a response but what canola price would you use tolday if you would developing a business case/financial plan for a land purchase decsion?

[farming101]

Total open interest has leveled off the last few days. Might be an indicator that the rally is going to take a pause. However it might not be today. Another green day so far.

[farmaholic]

If you can tell me what my canola will yeild with any degree of certainty, I will tell you what price I'll plug into the formula.

I would lowball it though. Betted to be pleasantly surprised than utterly disappointed.

[charliep]

Just trying to figure out what a good canola price is.

I will stick my neck out and say my current year/long term budgets would be in the $9 to $9.50/bu area. Is this a forecast for prices this fall? No. It is what I would use in my decision making.

[blackpowder]

No no no Farmaholic. Your never going to fit in with those $5000-$10000/yr advisory services with an attitude like that!

[bucket]

Charliep

Then the decision is easy - don't grow it.

[Oliver88]

It's unfortunate lots of farmers sold for under $10/bushel.

[agstar77]

And that is why there will be less canola grown this year. 10 barely covers cost in a good year.

[charliep]

Which raises the question about what will be grown. I would be interested in what you are seeing in your businesses in terms of gross margins for different crops. Everyone highlights what they won't grow but I have to ask what they will grow. Are these crops really than much more profitable?

I also highlight caution is you are growing smaller production crops with more limited markets. If is quite easy to over produce your demand base with the impact a severe drop in prices.

I also caution that volume driven metrics/performance measures have trained grain companies and railways the benefits of selling and working logistics on high volume generic crops - read canola and wheat. Better margins/simpler logistics than trying to move smaller volumes crops (particularly within North America). Like it or not, the system knows how to handle large volume generic crops.

[crusher]

Charlie, I think you bumped your head before making that last comment on them knowing how to effectively handle large generic crops.

I got filled this morning. Net $12. Off to Phoenix tomorrow, even though the forecast is sketchy..

[freewheat]

Charlie, on my farm, the only crop that nets LESS than canola, appears to be feed barley.

CPS wheat at feed prices, Faba beans, Canaryseed, Oats.

Not only do those crops offer a better return at average long term yields, but they are FAR less risky, and cheaper, sometimes much cheaper to grow.

Canola is not what it once was. One must look at the net, not the gross potential. To have canola perform, you need to put much more into it than most other crops.

That is using 10 dollars even for canola, btw.

For me, it is a mere rotational crop. Sure, you I could hit a home run and get 55 or 60, it has happened before: But it HATES wet conditions, it simply costs far too much to grow for the potential return, using average prices...