2012
· A year ago today (June 19, 2012) was the day when the December 2012 corn contract finally managed to trade through $5.50/bu (was at/below $5/bu in Jan) and to begin a nearly non-stop rally toward an eventual high of $8.49 in July.
· On Jan 1, 2012 the Nov 12 Canola futures closed at $500/mt, it proceeded to go up as South America's drought intensified which resulted in them producing a smaller crop, then the 50 year drought in the US pushed prices even higher
· Those two droughts were the main factors for the prices rising and funds jumping in buying futures and options
· The 2012 canola futures high was $655/mt which occurred during the summer when beans hit $17/bus and when corn was over $8/bus
2013
Ø the difference in 2013 is South America has already produced a bumper crop
Ø If the US produces a bumper crop which they have the moisture to do we could very well see canola futures at $500/mt
Ø So the reality is those that don't forward price might be in for a bad surprise
Ø Canola basis levels for harvest delivery are historically narrow
Ø Use Min price contracts where needed, we have been in a bullish market for 18 months now and on the verge of new crop production with little to no major global growing areas at risk,
Ø We may also see weather scares as those are normal
Generally the longer people wait to see their own crop become more established the less uncertainty and therefore the less weather market premium stays in the market. When that happens you may very well see lower futures because the risk premium has decreased. When coming off a period of high prices its not good to hope for what we had but you need to evaluate the current situation and determine what is good now for prices and cash flow and bin space. Having some plans in place for new crop are crucial in the new environment.
· A year ago today (June 19, 2012) was the day when the December 2012 corn contract finally managed to trade through $5.50/bu (was at/below $5/bu in Jan) and to begin a nearly non-stop rally toward an eventual high of $8.49 in July.
· On Jan 1, 2012 the Nov 12 Canola futures closed at $500/mt, it proceeded to go up as South America's drought intensified which resulted in them producing a smaller crop, then the 50 year drought in the US pushed prices even higher
· Those two droughts were the main factors for the prices rising and funds jumping in buying futures and options
· The 2012 canola futures high was $655/mt which occurred during the summer when beans hit $17/bus and when corn was over $8/bus
2013
Ø the difference in 2013 is South America has already produced a bumper crop
Ø If the US produces a bumper crop which they have the moisture to do we could very well see canola futures at $500/mt
Ø So the reality is those that don't forward price might be in for a bad surprise
Ø Canola basis levels for harvest delivery are historically narrow
Ø Use Min price contracts where needed, we have been in a bullish market for 18 months now and on the verge of new crop production with little to no major global growing areas at risk,
Ø We may also see weather scares as those are normal
Generally the longer people wait to see their own crop become more established the less uncertainty and therefore the less weather market premium stays in the market. When that happens you may very well see lower futures because the risk premium has decreased. When coming off a period of high prices its not good to hope for what we had but you need to evaluate the current situation and determine what is good now for prices and cash flow and bin space. Having some plans in place for new crop are crucial in the new environment.
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