Canola - What to Do?

[melvill]

The part of the equation that's missing is "demand" or more correctly amount consumed. As one analyst (who shall remain nameless for fear that I get a phone call) put it, currently it is US soybean supplies that need to be rationed by high prices, not world ****seed/canola supplies. We haven't had export customers banging at our door to buy Canadian canola or Canadian canola oil. If you look at Charlie's S & D at http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sdd5325?opendocument , or anyone else's S & D, you will see that unless things change, we're not going to have a particularly low carryover even with good, but not exceptional exports and crush.

[melvill]

What do we need to perk up the market and strengthen basis? Sales of seed to China or Pakistan. Guess what? Rumor of a sale of one and possibly two cargoes of canola to an Asian destination, likely either Pakistan or China. Watch for confirmation. Hope the news says two cargoes.

[charliep]

How many of you have used/are using futures directly to hedge? What has your experience been? What arrangements do you have with the bank in terms of margin calls (if they happen)?

[melvill]

More parts of the "why canola prices haven't picked up" puzzle. Canola needs export business - confirmation of a 50,000 t cargo to China yesterday but, based on industry calculations, seller had to sell at about $10/t below the cost of replacing that seed.

Another part of the puzzle - ocean freight to China from Vancouver now $40-$45/tonne compared to $20-$25/tonne in July and early August. That hurts canola more than soybeans 'cause canola needs exports and soybeans needs exports much less.

[Everest]

Oct 23..

Canola seems to be a bit of a reluctant follower of the bean and oil rally, partly explainable by the rising $Cdn. Yet crush margins (and tonnage) at near record levels, and good exports seem to be happening or on the horizon. Yesterday, in what seems a bit unusual, the vice-president of grain operation for SWP talked about up to 500,000 MT to China, which, if present usage rates continue, would tighten ending stocks to very lo9w levels. So it looks to me like things are moving along quite nicely for canola. Some basis levels have even tightened up in the last week.

Are hedges swamping the canola pit? Is the extremely low CWB prices for wheat causing farmers to sell canola at a rapid rate to their pay bills? How much is the CWB monopoly depressing canola prices at the moment? Are we facing a possible future price spike if we don’t ration early enough?