Canola pricing?

[gmj]

I am having a hard time pricing canola for off the combine delivery. The Nov. futures doesn't look to bad but the local basis is horrible at anywhere from $32 under to $40 under Nov.
Are the futures going to rally some more with the major european ****seed producers and the western prairies in a fairly bad drought, and the malaysian palm oil production reduced as well.
Or are the futures going to slide lower with a huge soybean crop in the states and Brazil supposedly still sitting on most of their crop.
Thoughts or ideas form anyone?
The canola crop around here actually looks very good.

[charliep]

I will leave for discussion but a couple of points of clarification/comment.

Palm production will actually be up over the next six months. Inventories are also reasonably large. The upside has been by large India and Chinese demand with emphasis on the later. Soyoil/soybeans will also have to be watched. One consultant we use is talking about lower soybean/soymeal prices reducing crush somewhat in the US with the implications soyoil making up a higher percent of crush. Another factor will be oil yield on soybeans. A drought year apparently increases oil content (trying to remember on canola) - better growing conditions in US means reduced soybean oil content.

Wide basis to me means sell futures and wait for basis to narrow. I would go out to January/March if cashflow allows. Otherwise hope like hell the Chinese buy a wack of Canadian canola for Oct./Nov./Dec. movement (already some business on the books) that allows good deliveries off the combine.

[melvill]

One more thing, gmj. I hope that, if you have several canola buyers within reasonable distance, you've had time to shop for basis levels. Here in southern Alberta last week there was over a $10 spread in basis, after freight, between canola seed buyers. Of course, the best one wasn't particularly good but the spread is worth looking at.

[crusher]

Canola has been trading sideways for a while now, if it breaks out to either side it could be a big move. I phoned around for Feb-Mar basis this week and found $11.33 under AU Edmonton to $30 under Cargill ATL - HUGE spread.