Canola Prices

[charliep]

Lots of mention of prices in the various threads including $554/tonne and $600/tonne so I am going to post as a new thread. I am not so much concerned about absolute prices/crop production potential but the everyday decisions you guys make in your businesses and the risk management strategies you use. To highlight my definition of risk (not others), risk management is giving up gain to protect against pain.

I will acknowledge the smaller crop coming even with average. Next Tuesday will provide a better indication of acreage - will let other play the yield guesstimate game. The will be rationing among the various customers. Higher prices do not create more production so the real issue will be who leaves the market/moves their business elsewhere or exists the market altogether. Demand destruction as one of you called it a month ago or so.

I will highlight three charts. Canola you can discuss/come to your own conclusions. Soybean oil (CBT) needs to be followed - don't know if canola futures can move to $600/tonne with 32 cent/lb soyoil futures. The loonie is the other feature to follow. I am going to post monthlies - you can go to the weeklies if that makes your point better.

[URL="http://www.farms.com/markets/?page=chart&sym=RSX15&domain=farms&display_ice=1&e nabled_ice_exchanges=&studies=Volume;&cancelstudy= &a=M"]canola[/URL]

<a href="http://www.farms.com/markets/?page=chart&sym=ZLV15&domain=farms&dis play_ice=1&enabled_ice_exchanges=&studies= Volume;&cancelstudy=&a=M">soyoil&l t;/a>

<a href="http://www.farms.com/markets/?page=chart&sym=D6Z15&domain=farms&dis play_ice=1&enabled_ice_exchanges=&studies= Volume;&cancelstudy=&a=M">Loonie&l t;/a>

[charliep]

I will also highlight the inverse in canola futures and effectively flat price in ddc contracts. I suspect that the market may rally short term but in the past in similar situations, markets have made their highs in the summer/fall.

[TOM4CWB]

Dear Charlie,
Looks to me that Resistance $600 and then at $650 will be hard to break on the monthlys.

If our canola crop drops to half of expected... we go to a premium market with crushers fighting over the seed to fill precontracted sales. Soy and Corn at that point are not going to stop the canola from topping at $700/mt (if lack of rainfall cuts canola production by 50 percent).

[bucket]

You don't understand pain charliep.

There are guys with 60 buck an acre seed and close to another 150 bucks in fertilizer and spray fuel etc.

They have probably priced some of their crop at 10 bucks only now to realize their whole 10 bpa crop is priced.

You do they math. Where does another 150 bucks an acre come from in using the market to protect against pain?.

A ****ing nickel a bushel isn't going to cut it. And if your theories are so well proven why are you not drinking on a beach somewhere?

Not arguing and I apologize in advance if I seem rude.

But if you still work for the alberta government do your alberta posters a favor and tell your bosses how ****ed up it is in the country.

[freewheat]

Soy and corn is not going to mean a thing, if domestic canola is short. Not a thing. Yorkton can not crush soy or corn.

[sumdumguy]

Gold will be king -cash will be king-grain will be king----take your pick.

[Braveheart]

If bean oil doesn't pick up expect to see a lot of crush plants close for "maintenance".

Basis will really suck with futures volatility and lack of demand. Sell futures or own puts.

Expect a winter of inverse months.

[Braveheart]

Lots of things might be King, but bean oil will be Jester.

[charliep]

I once heard an expression from my days at UGG (was in reference to selling inputs) - If you are loosing money on every unit you sell, you don't make up profit margin by selling more volume. I will also highlight higher prices will not make more production so if I was a export buyer, I would be chasing the market right now. I would be looking for supplies elsewhere. If I was a buyer/short the market, then a different story. Same comments farmers. Higher prices will not offset low yields in terms of what is important - profit potential. Production risk is a matter for crop insurance with a highlight for Alberta farmers you do have the variable price benefit.

[TOM4CWB]

Charlie,

I am amazed the variable price benefit remains. What a total gamble for insurance reinsurers... is this actually part of the assessment for the 1 in 100 year events we have each decade???

[SASKFARMER3]

If the pattern doesn't change on weather all the smoke in the office rooms can't pull a rabbit out of this mess even Alberta!
So here it is 12.275 total production if we're lucky and no fall frost!

[charliep]

Perhaps we both can agree government doesn't control weather.

[TOM4CWB]

Charlie, this looks like a one in 200 year event to me...

DTN this morning; "Hotter Temperatures, More Dryness for W. Canada

The long days of summer are in place but we are seeing a weather pattern evolving that is quite similar to the persistent patterns of the mid and late winter into early spring. This pattern that is developing will feature a strong trough across central and east-central Canada while a strong ridge develops across the western U.S. poking northward into southwest Canada.

Despite an upper air pattern looking like February we are not expecting winter weather to be attached to this pattern. We will see some of the same anomalies as we saw during the late winter namely drier than normal conditions and above normal temperatures during the remainder of June and into at least the first week of July.

The hope of some widespread beneficial rainfall for the dried out central and western Prairies will be minimal at best during the next 10 days and the additional problem of hot temperatures are likely to be added to the equation as well. Like last winter when the western Prairies saw the warmest temperature anomalies and Manitoba saw readings a little colder at times the summer version should produce similar results.

Temperatures could reach as high as 35-40 degrees C (95-104F) for some parts of southern Alberta and southwest Saskatchewan during the next 5 days while readings across Manitoba run close to normal. Rainfall looks spotty at best out west with Manitoba more in line for a few showers once in a while.

As we move to the middle and end of next week we might see a modest opportunity for some scattered showers across the northern Prairies as a front drops southward but this system does not look like a beneficial rain producer. During the past week we have seen some spotty showers across western Canada with local areas seeing some help to soil moisture content. The spotty nature of last weeks' rains have helped a few but left most without much help.

The cause of the persistent dry weather pattern could be tied to the large area of warmer than normal sea surface temperatures across the eastern Pacific and Gulf of Alaska. This large area of warmer than normal waters has been in about the same location since last fall and some think has helped with the prevailing ridge through western North America. Today's SST anomaly analysis shows more of what we have seen for many of the past several months and in fact some intensification of the warm waters has been noted during the past month.

While there are many factors that cause and create the weather patterns around the globe at any given time it appears that this warm blob of water through the Gulf of Alaska may be an important factor in producing the dryness for western Canada. Given its' persistence we unfortunately have to favor the idea of above normal dryness for the critical next few weeks of crop development period. Temperatures are most likely to be hotter across the west than across Manitoba with rainfall more spotty for the west than across the east. Given this forecast we will probably see increasing coverage of crop stress and even failure due to dry conditions.

Doug Webster can be reached at doug.webster@dtn.com"

[cottonpicken]

This will be an interesting short cover rally Years of sell it forward or your ****ed have lead i bet to the biggest offside trade in western canada.

I have tried and failed to find the physical volume vs paper trade in the food stuffs. Know it for other things.

If the speculators smell blood in the water look out.

[biglentil]

One of the best bets i have seen in a long time,going long canola futures. The only sniff the traders on the street have is the cocaine up there noses.