Will canola continue to rise?

[wd9]

How much more up potential is there to the canola market, are we at the top? What do some people think?

[charliep]

Honest answer - don't know. Given the tight US soybean situation, there is optimism going into the spring. Pace of disappearance for canola has also been strong so I think we may be surprised how tight carryovers are this summer. My view may not be widely held by the industry.

Offsetting this is the strong likelihood (assuming mother nature doesn't kick in with a drought) that world oilseed production (including canola in Canada) will explode in 2004/05.

My recommendation is to have price targets (starting with potential sales today) and react by selling a portion at a time. Plan on having all canola sold by the end of the spring (too much risk to carry cash into the summer).

If you are an optimist/nervous Nelly that thinks you will leave money on the table, look at futures/options replacement strategies. Be prepared for risk/lots of volatility. Without talking too much about personal experience this can be expensive.

Just as a note, I continue to encourage paying close attention to new crop pricing opportunities.

What are others thoughts.

[crusher]

We are getting close to the magic $400. My guess is that we will slide back from that - might coincide with S. Am. commencement of harvest. After that, if there are any problems me may see the final push higher at a rapid pace. I've got some left to sell at just under $400 and then saving a little for a possible move higher.

As for new crop, I've hedged a portion through a specialty fixed price contract, and sold some for November delivery. There may be a small bidding war for acres in the US between beans and corn reflecting higher new crop values. My guess on the Candian effect will be slightly higher canola prices (futures) because the crush margins will be better. Unfortunately I think basis will not improve - our seeded acres are already going to be high. If you do a calculation between the percentage of our new crop vs old crop canola and compare this to beans in the US you will see our new crop prices are considerably better based on this analysis. Now that we have a plan on canola, what about the other 3/4 of the farm??

[charliep]

Will leave you question about other crops to discussion. I will highlight/maybe get some discussion going around the impact of currency on canola values. Had one person suggest a 72 cent loonie will likley be a reality. The difference between a 72 and 78 cent loonie is about $30/tonne in terms of canola. I apologize for being a whimp but this is going to be a wild one this spring. Selling a little at a time/sleeping well at night will be a much better strategy than pretending you can call this market and contibuting to ulcers.