Australian Hedge Pressure

[rain]

Charlie lots of talk about Australian hedge pressure on our canola futures. We grow about 4.5 times the canola they do. Is hedge pressure for real or is it just talk from Winnipeg. If it is for real when is the Australian Canola harvest.

[melvill]

Just talked to someone who is "in the know" about Aussie trades on the WCE canola pit. He suggested that 10% to 20% of the volume originates down under.

The Aussies are getting geared up to harvest canola now with peak export sales pressure coming in Jan & Feb.

[rain]

Seasonal trades indicate that untill a crop is 75-80 harvested expect hedge pressure (down ward movement). this did not happen in Canada nore the US this year. Why should an Austalian crop coming off into a very dynamic oil market cause futures to drop.

[TOM4CWB]

Rain;

If our CDN$ was at the same level (20% lower) than at last year at this time, we would be looking at Jan 04 trading at 360/t.

It is very healthy to have a fluid market with good volume... as when profitable prices occur, then we have the ability to hedge them without crashing the market down.

The US beans are rallying on weakness of the US$ as much as on anything else... looks like to me!

[TOM4CWB]

RAIN;

That should have been $460/t not $360/t.

[rain]

Tom your missing someting as well. Soyoil is up 29% since December of last year as well. That goes a long way against the Canadian $.

I feel and hope the elastic band on canola is getting tighter. Sure hope it does not break.

[TOM4CWB]

Rain;

Soybean is up 29%, because the US $ is down against most currencies over 20%.

US wheat prices are higher for exactly the same reason!

[rain]

Minn Wheat is about the same price as last year at this time.

Soybeans where 7.39 to 7.50 last year in December. Beans are up about 4%

Tom we can all do the math on how the Canadian Dollar should be affecting exports. I am beginning to question that.

[charliep]

Perhaps we all can agree canola represents good value to customers (i.e. cheap relative to alternative oilseeds). This is a change from last year when canola was in short supply around the world and was expensive relative to alternatives.

Cheap prices tend to take care of themselves so I like to look at the numbers. Visible commercial stocks canola (week 17 CGC grain stats weekly) - 770,000 t versus 1.08 MMT same time 2002. Canola exports to date - 1.54 MMT versus 641,000 last year same time. Crush - 1.08 MMT versus 641,000 t.

Given the current situation, I think the canola industry will keep up this pace of crush and exports right to the end of the crop year. I think Canadian canola carryovers have potential to get very tight this summer which has at least some optimism for prices. The enemy is the availability of South American starting in March and a potential return to better yields in the US/a monster increase in Canadian canola acres this spring.

Long and short. Still a disciplined canola seller with targets. Having said that, there is at least some reason for price optimism first half 2004.

[charliep]

Screwed up on the crush. Should have been - Crush - 1.08 MMT versus 785,000 t.