Canola Strategies

[charliep]

Tom4cwb

I found your comments on grain movement interesting. The only issue on this front that I have heard of is summer movement of mid quality/lower protein durum out of the elevator system into the terminals. Given the size of this years crop in general, export movement shouldn't be a problem.

There are a lot of pluses and minuses on both sides of the grain/oilseed/pulse market outlook this year. I think it is a good year for balance/scale up selling on all commodities. Replacement strategies may work this year (I share some of your concerns on the overall economic front) but a person can afford to be patient until the market gives clearer signals. It also means you can focus on getting the harvest done/fall work completed without distractions of trying to call the market.

I am optimistic about the future of crop prices (would't likely go down much to go much/have potential to go higher) but would still have the discipline to make sales in here.

Comments.

[TOM4CWB]

Charlie,

Fall work is the preperation for the next crop!

We need to be making decisions now about next year!

How much Canola do we grow?

Are CWRS and DURUM the only wheats the CWB can come close to doing a reasonable job of marketing?

How much barley do we plant?

We must get clear signals, the only clear signal I am getting is that CWRS is the KING ahead of all other classes of wheat, and CANOLA is needed to generate cash flow.

Should we start pricing 2002 Canola?

[melvill]

I've made a strategic decision. I'm staying out of the pro-CWB-anti-CWB debate. It's sort of like picking up a hot cast iron frying pan with oven mitts that have holes in the palm.

I will touch on the pricing 2002 canola though. One peak at Friday's closing quotes on the WCE at <http://www.wce.mb.ca/market/_activepages/market.htm> with the $30/tonne inverse between Nov 91 canola and Nov 92 canola tells the story. There's along time between now and seeding next spring although I will grant you that the expected much larger S. American oilseed harvest coming in February could be seen as a threat. However, Nov 92 canola at $306 less a $10 basis for Central/North Central Alberta giving an possible $296/t or $6.71/bu. next spring doesn't get me excited. But Nov 92 canola at $335 would increase my pulse a little. Besides we've got lots of time for summer 02 weather rallies.

[charliep]

I agree with Lee's comments on new crop canola prices.

Still early to make any other comments on 2002 crop. With regards to canola, we can easily absorb a 20 to 30 % increase in canola acres next year - canola is a world crop with more than enough demand to absorb whatever we produce (at a competitive price with other oilseeds naturally). Your comments on CWRS wheat are likely correct on the CWB side. Domestically, CPS wheat will continue to have a fit domestically.

My strategy for the coming year would be to grow a blend of crops that fit my long term crop rotation and show up best in my budgets. I am optimistic (notice not bullish) about all crops market outlook in the coming year. The benefit is that you can plan on growing crops that have an agronomic fit (good yield potential based on your long term plan), business fit (profitable) and a market fit (fit with a customer profile).

I am looking forward to dealing more with questions like this during the winter. Comments.

[Kasro]

It seems like a long time ago now that we had our shortlived rally in canola. According to the prevailing price, it seems also like the fundamentals have changed considerably. What are peoples' thoughts on:

1. What would the price be if we did not have a drought.....Production 6.0 million tonnes or more? Shuddder...shudder.

2. Is China completley out of the market for canola (or Soybeans) for this year?

3. Stats Canada is going to give us new numbers On Friday Oct 5. Personally I think 2001 production will be closer to 4.0 than to 5.0. What if canola production number is very low. Does that give us any bounce, or are crush numbers so bad it won't matter?

4. How many soybeans can the world eat? With Brazil growing more because they have an economic incentive to do so, and the U.S. growing them because the government pays them to even if the market price was zero, will our next problem be looking for an alternative to growing any oiseeds here in Canada? It looks like that to me. And pray what alternative is left?

[charliep]

I'll throw in my two bits worth. The major change has been a less optistic vegetable oil outlook (more supplies palm oil than expected and the need to move some of the monster soyoil stocks in the US).

1) What if Canada had grown 6 MMT? Price may have been down some but likely only $10 to $20/t at the outside. Canadian canola has a large demand base (read China) as long as it is competitively priced with other vegetable oils - we can almost sell as much as we want.

2) Will China be there to buy soybeans or canola this winter? This is the billion dollar question. In their drive to improve livestock productivity via improved rations, they have continued large protein needs. Vegoil demand will also continue to grow. They are very price sensitive on the one hand and recognize their influence on prices.

3) I'll take you up on your bet as to whether Canadian canola production will be closer to 4 MMT than 5MMT. If production is less than 4.5 MMT, look for canola prices to rally regardless of other oilseed markets. I'll work the minimum needs demand scenario - domestic crush 2 to 2.2 MMT (capacity 4 MMT/recent years crush around 3 MMT), Japan - steady as a rock around 1.8 MMT historically), Dockage and seed - 400,000 t (8 %), Mexico - how much business is already on the books?, China demand - who cares under this scenario.

4)Too many soybeans? Your question about China/demand is the relavent one here. The question more relevant for canola is growth in world vegetable oil demand.

What are others thoughts on the world oilseed market/canola price outlook?

[TOM4CWB]

Charlie,

Cheaper black oil means cheaper vegoil.

Canola is the most amazing plant, it can take late growing season moisture and turn it into seed presto!

We have normal Canola yields this year, in spite of all the bad weather!

When the world economy is in recession ( at least ) I wouldn't expect any rally without a major positive shift in fundementals.