canola price

[macdon02]

Anyone remember July '17? July futures blew off in a rally, all the grain cos rolled to Nov as volume dropped off with option expiry. It left a massive gap, July futures did the same last year, except we didn't get the high, we got a low in July. Seasonally, July is a "high". There's a tendency to rally on weather concerns etc. What bothers me, is we've taken out last year's low, so on a yearly level, it's fugly(lower low) not bullish. If a person believes in cycles, the lack of a July high, means the seasonally high periods will shift to lows. Unfortunately im guessing it's pretty much straight down from here into harvest when it'll be a prove it moment and we'll get hopefully the harvest low and move up. Think beans last year, they headed for the 09 low, applying that to canola I'll say sub 400 canola. Hindsight is a wonderful thing ... watching Chicago wheat at the moment for a close over 460 end of March, if that doesn't happen we risk last year's low at 413.2. Taking that out, I'm guessing we got 3 years rattling around in the basement. My mentor always said gaps fill like a gestating pig, if not 3 days then 3 weeks, if not weeks then months and finally years, that's a corn rule and not sure it applies to canola but im hoping it does, 3 years from the July '17 gap would be July 2020. I've heard 25-50% of last year's canola unpriced and on farm.... this isn't done. Eventually the market will either bleed everyone of cash or space. It never lets us out gracefully.

PS... if we rally in July and take out last year's high, creating an outside reversal on a yearly level my view would change to bullish, but we need to take out last year's high for a longer term bullish stance.

[farming101]

6 MMT on the high side for ending stocks but it will be record high and that's all that matters

Record is 3.008 MMT in 2014. I think

[shtferbrains]

For perspective, 6 MMT is about what Alberta grows.

[furrowtickler]

Sure was huge yields on below average general rainfall .... again for the 3rd year in a row .
Amazing crop I guess ...
maybe if we have even a drier year this year we can break yield records yet again and get carry out to 7 mil ? Lol

[TechAnalyst]

Although there are obviously plenty of reasons to be concerned, the only certainty about marketing and price forecasting is it helps to take emotion out of the process as much as possible. With that in mind, I would like to point out a few factors to keep in mind.

Even experts (if you want to call them that) don't want to look like idiots in front of crowds. To that end, usually speakers tend to justify the recent price action, not stick there neck out and suggest why prices may do something other than what they're doing. In short, disregard the 6MMT.

Contrarians believe the most likely time for a price reversal is when the majority are in agreement of a price direction. Besides public opinion, one way of measuring that is with the Commitment of Traders data. It currently shows Managed Money Traders (large speculators) currently have a significant net short position of almost 50,000 contracts or 1 MMT. Commercials are on the other side of the trade with a net long of a similar amount. The commercials are buyers for risk management purposes and as such are reluctant to sell when prices start to rise. The money managers only care about profit and tend to be very aggressive buyers (in a case like this) if or when something changes. This leaves a short term imbalance of aggressive buyers and reluctant sellers with sharp price moves common. Some of the most significant price swings occur when this group covers or even reverses their position. As annoying as this all is, it may be the key to a bounce this spring that could allow attractive pricing opportunities.

Looking at China, remember they didn't ban Canadian canola imports, just removed one supplier. They are extremely shrewd traders that need oilseeds given the lack of soybean imports from the US. When the smoke settles, they may have used the price break to purchase significant quantities from the alternate sources. They have executed similar strategies in the past and it can't be ruled out for now.

Regarding the latest official estimates, Ag Canada is predicting an 18/19 carryover of 2.5 MMT with the same forecast for 19/20. This would be unchanged from 17/18. The USDA is slightly more bearish at 2.7 MMT for old crop and 2.55 MMT for 19/20 (new crop).

According to weekly grain handling statistics up to March 10th, exports are only off .537 MMT (8.6%) from last year vs an Ag Can estimate for a .4 MMT increase on the year. On the other hand, crush is running slightly ahead of last year compared to estimates for a .1 MMT decrease. Although there could be an increase in the carryover from the latest Ag Canada estimates, it may be nothing more than what the market has already factored in.

In short, politics, weather and planting decisions will have a huge say in how this plays out but keep in mind there are plenty of bullish factors for traders to focus on if they decide to. (For example, acres cut due to all the recent turmoil, drought conditions continuing then a realization that China didn't actually reduce total purchases) Such developments would likely inspire the managed money traders to cover their shorts, providing a nice rally to price into.

To be clear, I'm not bullish, just suggesting the bearish sentiment may be overdone and highlighting reasons why we could see opportunities to sell into rallies yet this spring. Given the significantly high US soybean carryover levels, I would recommend keeping your expectations realistic and your target prices set ahead of time.

[farmaholic]

Thanks for that glimmer of hope.

[Guest]

Nice little pop in canola today. Feels good