weather markets

[monaco]

Charlie : What do you make of the weather situation in the winter wheat growing regions of USA and the soybean area of Argentina ? Is this enough of a drought potential to turn our prices by spring ? Is this a good time to sell canola out of the bin and use options to capture any upside potential ?

[charliep]

We have potential weather problems but I would be cautious. This is particularly the case with soybeans. Weather has impacted S. American production but for the most part this has been built into the market. The biggest concerns for canola are the increase in soybean oil stocks as of the Fri. USDA report and declining world vegoil prices (palm oil in particular). Canola prices will continue to struggle in the short term unless we get weather happening in the North American market this spring. Weather is becoming more interesting. US hard red winter wheat areas are dry but winter wheat is an extremely tough crop. Weather over the next month/how the crop breaks domancy in March will be the factors to watch. Tension is also starting to build in the corn market but we still have 2 1/2 months to follow weather. On the canola, my focus is to still sell rallies and watch for premiums/narrow basis. On the options/futures strategy side, do you want to play the side of trying to pick bottoms or is it better to wait for a breakout when the market has given a clearer signal that it wants to go higher? My thoughts are to be patient but for the aggressive trader it is likely okay to start building up a portfolio of calls.