Old Crop Canola ??

[crusher]

I keep seeing strong Canadian crush, strong US bean exports, high bean oil prices, but flat canola prices. Charlie you mention you are somewhat bullish canola, but it sure is trading in a tight range. Who's doing the selling farmers or specs? When is the next Canadian stocks report due? I was questioned by StatsCan last night about my stocks.

[JACKFLASH]

Crusher
Growcanola.com may give you the info you need.

[crusher]

Jackflash
Thanks for the direction. Great site but going to fee service next week.

[charliep]

Not necessarily really bullish on canola but have to admit all is not negative.

Positives for higher prices.

1) Tight US soybean situation with much of the 2003 crop sold/delivered during the first half of the crop year.

2) A decent start to moving the entire 2003 Canadian canola crop. Canola is relatively low priced relative to other oilseeds. Crush margins are good with the comment that canola premiums have slipped from 6 to 8 cents over soyoil a year ago to similar values to soyoil today.

3) I think canola carryovers will be tight this summer (assuming statscan has the production number right). It is always amazing in a year of plentifull supplies how every does the job of selling the whole crop while in a year of droughts (last two), no one sells and carryovers end up large.

Negatives for prices.

1) Potential record South American soybean crop. Some minor issues in Argentina from drought but nothing much exceptional. A comment is that Brazil and Argentina are large countries with a harvest window that starts in February and carrys on to June.

2) Increased US soybean and Canadian canola acres this spring. Based on current market information, I think a 10 to 15 % increase in prairie canola acres is a distinct possibility. Have to have some respect for dry soil conditions across western Canada but will make the assumption of normal rain this spring.

Basis levels have started to narrow and I think this trend will continue. My strategy remains to have price targets and sell some (maybe not all) when they occur. That is $8 to $8.25/bu in todays market (Alberta) for some.

I would be having a core look at picing new crop at current levels ($7.50/bu ish). Is this the high price of the year? Don't know. $7.50/bu should be profitable. It is a good price historically. World oilseed production in 2004 is likely to be large unless Mother nature steps in.

The next Statscan report (December 31 stocks report) is Feb. 5.

[ianben]

Charlie
Positive I have seem over here is BSE in US will mean less or no meat and bone meal allowed in N America.
Will need replacing pulling oilseeds and pulses higher.

Is this a valid plus?

[charliep]

Decisions haven't 100 % been made on meat and bone/other slaughter by products. The move to plant proteins will have a positive impact on crops - the level of which will depend on how stringent the rules are and the impact on livestock numbers/competitiveness.

The issue then becomes how to deal with the slaughter by products from an environment standpoint and the value they used to provide processing facilities. Ianben - my understanding is that all meat and bone is incinerated in Europe. Have you seen other uses for these products?