Will the market react?

[dnach]

If it continues to be extreemly dry in Western Sask/Eastern Alberta will the Canola or wheat markets react at all, or will they continue to focus on the U.S. and Brazil?

[charliep]

Will get discussion going by saying depends on the commodity and location. Wet in Manitoba. Okay top soil wise west side Alberta (no sub soil so dependent on timely rain). Eastern Alberta - dry period. I will let others fill in Saskatchewan.

Feedgrains - Hyper sensentive acres/weather western Canada/US midwest.

Oilseeds - South America becoming less important as more crop harvested. Signals are to increase production US soybeans. With minimal carryover, also sensitive to US weather. With the major increase in canola acres coming this spring, I will be watching how aggressive grain companies/crushers are in forward selling fall positions to customers. To get a major further rally in new crop canola, I want to see higher soybean oil prices or grain companies that short the market this fall/get caught by a weather problem.

Short term, I am not all that bullish wheat from the supply side (even with potential drought at home). Demand side I am more friendly but that is 6 to 10 months out.

[rain]

Charlie with the huge drop in soybean out put this year. And assuming demand for meal and soyoil will be at least steady with last year. Should the demand for canola not be better. All canola needs is and extra million tonne of sales and a big canola crop may not be as big as it seems.

Do you know if demand for vegoil is static or is it growing also. I have not heard much about vegoil sales lately. Most of the rhetoric is the shrinking soybean crop.

Any news on palmoil output and demand.

[charliep]

Rain

I agree with your comments. Some of the largest canola production years have also been the highest export/price years - the 1996 to 1998 period when el nino impacted palm production.

http://futures.tradingcharts.com/chart/CA/M

If we produce a 7.5 to 8 MMT Canadian canola crop, then China will be the critical factor on the demand side. The question in my mind is whether China shifts some demand back to canola from soybeans this fall and how aggressive grain companies are in selling the fall position. I will also be watching the Chinese position on GMO canola - see this week's front page headline in the Western Producer. As a note, China is one of the world's leaders in biotechnology research and adoption.

Your question on palm oil is also relevant and I'm not sure I have the answer. All eyes are on the US in the short term and whether rationing of supplies is occurring. Not hearing much on palm oil so assumption normal increase but nothing spectacular. Demand side in China and S.E. Asia continues to grow at a rapid pace in these emerging economies.

Two other issues to watch. Currency adjustments. Trends in vegetable oil traits/how valued.

[Incognito]

Charlie:

I'm gonna take Boone's 2 X 4 and whack you until you get on the wheat bull side....lol

MGE July has moved up 38 cents since the Friday before Grainworld on February 22 or 9.3%. Canola has moved up 7.1% in the same time frame and everyone wants to talk about canola. Go figure.

[Incognito]

More fuel for my side of the ledger:

Quote from Reuters:

The Minneapolis Grain Exchange in 2004 registered its highest-ever trading volume for the month of March, the exchange said in a statement on Thursday.

Total futures volume for March was 104,933 contracts, surpassing the exchange's previous record of 92,234, set in 1999. Total spring wheat futures volume for March was 104,732 contracts, topping the previous March record of 90,340, also set in 1999.

Fiscal year-to-date, total futures and options volume at the exchange is 54 percent ahead of the same period last fiscal year, the statement said.

[charliep]

An interesting question to look at is how much of the new open interest is CWB hedge activity to manage the risk around producer pricing options.

I thought I might throw up the MGE futures charts(December 2004, weekly, monthly) and see where others sit on the bull/bear scale.

http://futures.tradingcharts.com/chart/MW/C4

http://futures.tradingcharts.com/chart/MW/W

http://futures.tradingcharts.com/chart/MW/M

[Incognito]

Don't forget that increased selling pressure from the CWB is being absorbed since Feb. and we are still going higher.

Unless they are buying cash and buying futures..Texas style

[charliep]

I realize the CWB has been selling to offset cash purchases through the new crop fixed price contracts and the market has more than absorbed.

Shouldn't go back over history but what would have happened in the fall of 2002. An extended FPC contracting period would have allowed farmers to more aggressively sell into the fall rally and MGE would have likely absorbed this hedge pressure as the CWB offset their pool risk (sell futures) without a hiccup.

[Incognito]

But Charlie that would be going against years and years of protocol and someone making the decision to be market oriented.

If we are 75-80% wheat sold already and they screwed this marketing year up again - heads better roll.

Worse, I think China has comleted a coup d'tat with the Aussies 1970's style. How else did the Aussies run out of wheat to sell already?

I don't think the industry is ready for a wide open wheat market. Dual maybe. Barley should be 100% open.

The Aussies have a totally different wheat board than we do and it is working like a machine.

If we can't capture these premiums, what is the risk management/weather department/sales team doing?

Developing ads for the Alberta Beef Magazine?

I'm not yet convinced that the fault lies squarely with the Board of Directors. Staff are following orders of a left wing whacko group of people who resist change. Part of that same group should be held responsible for the Crow Payout going from 13 to 7 to 1 billion dollars. And what do we do, elect them to run the CWB. And they run it more than you think they do.

[TOM4CWB]

Incognito;

How will the market react?

Memories of 96... wasn't April 28th the big peak day?

But you know... the whole world seems much more screwed up than it was in 96... wouldn't you say?

How do we put the US$ US deficits in both trade and spending into context?

If the World sinks the US... don't we all sink with them?

Can anyone (country) afford to allow the US to sink?

[Incognito]

Terrorism is whats screwed up Tom.

This is bigger than 1996. 1996 was a blip on the screen.

We are on the summit of a demand driven market worldwide rather than a production driven market.

I'm not old enough to have been through the 70's demand driven economy and the effect it had on grains, but I've certainly read enough about it.

If we can sustain this demand for a longer period of 6 months, buying habits will have to change, consumers will notice a difference at the supermarket and JIT delivery habits will change drastically.

We reached a 30 1/2 year high in meal today. These are uncharted territories for must of us.