Traders and analysts estimate Statistics Canada Wed numbers.

[boarderbloke]

http://www.brecorder.com/markets/commodities/america/93137-canada-wheat-canola-crops-seen-slightly-bigger.html

[charliep]

Always risky to put a number out prior to a report.

These trade reports are not survey based and responses are about as accurate as farmers responses to Statistics Canada. Responses may reflect the trades position in the market/what they want to be said and not the position they are trading/managing their risk on.

Don't look for a big reaction Wednesday. Demand/consumption are the drivers with production numbers known for a long time.

Pace of consumption geared for a lot bigger canola crop. Who is right/wrong? Good question. History will be the ultimate judge.

[mbratrud]

I read a report from an analyst today suggesting a number towards the higher end on Canola. This number was based on the the pace of consumption and the apparent ample supply. My Question is is it not possible that farmers are just selling aggressively? Our logistics system is much improved since the loss of the monopoly from the looks of things... I think there is going o be a suprise come summer much like the summer 12. just my 2 cents... I actually hope they overstate this number a bit.

[charliep]

Canola is a crop where 99 % of what is grown enters the supply chain so production is known by the end of the crop year when bins are empty.

I was a little rough on the providers of information to the pre-release forecasts - a little crabby today for other reasons. I need to apologize.

I will comment again will be a non report with few surprises. Canola I will admit to not knowing the final number and instead, carefully watch market behavior. Cereal production numbers will likely increase with maybe barley being a wild card. Forecasts that start big in the summer version and get smaller in October may get smaller yet. But with the unknown of feed and dockage, who knows actual production anyway.

[HappyFarmer]

Good point mbratrud.
Just because people are taking advantage of current bids out there today does that mean that there is more supply, nor should any "experts" assume so.

[charliep]

If you both really believe what you are saying, stay long crop in the bin.

I will give you a different scenario. A crush plant/exporter will be making sales all the way through here. If I was them, I would be going out and forward booking delivery via pricing contracts from farmers. I would be pretty aggressive in doing this if I was them because of the tight supply demand. Your risk as a farmer if the trade will have covered 2012/13 supplies through the winter and you hit a demand vacuum next spring. The demand vacuum would be aggrevated by better 2013 crops starting with South America and moving to the northern hemisphere. The inverse in the market tells you this now.

Has the trade shorted the market by over estimating supplies? No idea. What are they doing to secure supplies into into next summer? Current basis levels I think speak to that. Will there be a big blow up in prices? No idea. It didn't happen spring/summer 2012. The futures market rallied from $600 in March and stayed in the $600 to $650 range over the summer.

[charliep]

One of the most interesting things to me is the fact the ICE futures Canada is flat out to July. Your carry is in basis. Lots of pretty creative ways of working old crop basis off November 2013 futures.

I also note that the lowest board crush margin occurred in June and then increased right into early September. COPA board crush has been tightening since then. See COPA website.

[HappyFarmer]

Charlie.
I think you are misinterpreting what we are saying.
What we are simply saying is that just because
demand has been so strong does not necessairily
mean we have more canola to go around. these
canola bids are some of the best we have ever
seen through the first 5 months of the year.

Now of course what bids are showing is that they
are trying to aggressively bid for canola for farther
out positions. What the futures market is also
telling you is that it more comfortable with either
the purchases it has on the books for the next 3 to
4 months or demand looks to be weaker for the
next 3 to 4 months (personally i feel its more the
latter). It's also telling you that's increasingly
concered with getting coverage 5 to 6 months out,

In combination with that, Im personally am
looking at sub $55/mt crush margins and thinking
that those just arnt sustainable numbers for the
rest of the year.

FYI I am in Errol's camp with all my canola sold a
option purchased on it. How anyone can leave
600 plus canola bids on the table is beyond me. I
would sooner cash in and risk 15 to 20 bucks a
tonne on options than risk 30 to 40/mt loss with it
in the bin and speculate its going higher.

The multi million dollar companies are hedging
themselves every time they buy from us why
wouldnt I do the same?

[charliep]

All is not bad for crushers. Toronto canola oil
premuims over soybean oil are higher than normal so
the actual cash crush is better than reflected in the
theoretical board crush.

Perhaps my old world of trying to make margin in a
grain handling system based on through
put/efficiency. Not that anyone should have
sympathy for crusher but they will have an
interesting year trying to match oil and meal sales
with farmer purchases. Not that I suggest tha
farmers should totally roll over but there are ways to
help the buyer side meet their needs for consistent
supplies based on financial benefit for the seller.

Maybe not meant by your comment but I like the idea
of staying focused on making money versus strictly
calling the market. Price is one component but there
are many others.

[HappyFarmer]

Question for you charlie.
What margin in $/mt do canadain canola crushers need to make a profit based on todays plant efficiencies? From a export standpoint i know 6 to 7 bucks a tonne of net margin is normally what they are happy with but for crush i have never been able to get a straight answer. Have been told 50 to 55 gross a mt but based on today cost think it may be more.
Where do you find info on toronto canola oil and bean oil?

[samhill]

My comment would be that the world is on a food
precipice, never mind the fiscal consequences. All
counting on SA to provide stability, and may very well
occur. But conditions elsewhere are iffy, other than
Canada, we are in relatively good condition.
Canadian soybean crush reported to be very high, with
$100/tonne margins, likely not a big factor, but an
indicator.

[charliep]

Not sure on the required profit side. Will depend a lot on the crushing plant including efficiency, capacity utilization, size/age, etc. so I am not sure there would be one number for every plant. Your numbers are what I have heard over time for a cash crush margin.

On the Toronto canola price/basis, my source is ARD's Informa Economics subscription publication on world vegetable oils. Not sure (maybe others have access) to a public source of this information. Also need a better understanding of basis as applies to canola and a recognition that this market is only one of the many markets canola oil would sold to - each with its own basis.

During the 1990's and early to mid 2000's, the basis was zero to 4 cents/lb over soybean oil futures for canola oil on the posted Toronto canola oil price. The basis in the late 2000's to date have been more like 8 to 12 cents over.

[charliep]

I looked at the graphs to see if quoted in US or Canadian dollars. Some of the change could exchange rate related.