Canola marketing quandry

[carebear300]

I am in the process of combining my canola right now. I would like to market it all almost immediately to reuse the good hopper bins with aeration. I think the price will be up by spring. Is that a idea that has some merit, or am I overly optomistic? Please have patience with me I am just new the last couple of years to growing and marketing canola, lentils used to be my bread an butter till the disease problems did me in. There should be some simple, yet economical way to participate in future price appreciation in the canola market. Your input would be greatly appreciated.

[wd9]

Price has been in this price range less than a few percent of the time, good decision to sell. Just my $0.02. You can always buy canola on paper if you are confident it is still going up.

Canola markets look strong from the international perspective. China may be the big sleeping giant given their being quiet of true oilseed prodction or lack of it. Quietly the Transfat taskforce and gov in Canada announced volunteer removal of trans as opposed to regulation of trans which helps the adoption of healthier (HOLL canola) alternatives to just dumping in sats to meet regs. Indonesia is still a good 3 years from expanded palm production, soy is tapped out in the US, Biodiesel plants are coming onstream in Alberta - albeit a bit delayed, on and on. Should be a good steady market for a while in canola.

On the flip, bill c-30 which was to be the clean air part of RFS has been prorogued so it is in waiting. Bill C58 (transportation) is on the same train, pardon the pun, grrrr.

Ok $0.04 worth.

[crusher]

There already is a decent carry in the futures market, meaning if nothing changes the prices will be fifty cents higher next spring. Bunge Fort Sask. has the magic $10 for May 08 delivery. Sold some IMC canola in 2004 for that price, but this year's crop is 25% higher yielding. 10 x 45 is good enough for me.

[padron]

Crusher - just a correction in your perspective on carrying charges. The fact that deferred canola is worth more now than nearby delivery does not mean it will be worth more in the future - all other things being equal. In order to capture that carrying charge earning you have to sell for forward delivery TODAY. If you wait - and all other things remain equal - the price will be exactly the same as it is today. This premium is the market compensating you for the hard costs of carrying grain - storage and interest costs. There is every likelihood that that carrying charge premium will dissipate over time as the value of your service - in this case storing and financing the product - diminishes.

In essence higher deferred prices do not signal grain will be worth more in the future. They signal today's price plus the cost of carry. You still have to rely on good old supply and demand analysis to forecast prices in the future. Just as wd9 is suggesting.

Carebear - Get a good broker and track their recommendations.

Good luck to all. Sell it at the top!

[TOM4CWB]

Carebear,

How much is the risk value and investment in your Canola worth?

The Carry about gives you a reasonable picture. Holding grain has risk.

Can you get a decent basis? I would be more concerned about this part of your pricing situation. You probably can even get a minimum price contract on your seed you sell now and deliver... if you have a reasonable marketing partner... so you don't then need a broker to buy call options.

Stageing in sales is the most reasonable recommendation, dumping wheat or barley on the ground or in poor storage in a tough fall... it would not be a smart move if you can move Canola with a reasonable basis now.

[chaffmeister]

Carebear:

The answer to this question is a function of the best use of your aeration storage capacity. How much will you gain by storing your canola vs storing the other crop? Whichever gains you the most by holding is the one you should store.

I will reiterate what padron indicated – to capture the carry in the canola market you need to sell TODAY for delivery later. Although - in your calculations, you may want to consider the potential of the rally to continue. The risk of this not happening is one you may want to factor in.

You also need to think about your options for the grain that you want to put in the aeration bins (where I assume your canola is now/or will be).

If you’re forced to store CWB wheat and therefore must deliver your canola because of lack of space, then the canola carrying charge that you are not allowed to capture is the cost of storing the wheat.

General rule of thumb - storage should be used for the crop that will pay the most for that storage.

[wd9]

Hey Chaff, did you know the origin of Rule of Thumb was a law imposed in 1782 by Judge Buller that you could beat your wife with a stick as long as it was no thicker than your thumb?

Wish I was combining instead of writing this useless information.