Soybean Oil Headed Higher

[charliep]

Just a note that soybean continues to move higher. This is pushing canola up.

Kernel - We're still a long ways from $12/bu but I have started to store some money in my piggy bank for lunch. It may include humble pie.

[rain]

Charlie are you watching beans or beanoil?

[charliep]

Beanoil. Hefty demand on nearby soybeans and early concerns about S. America (keeping in mind things are early/conditions are okay) is adding a little enthusiasm on soybeans/meal.

[Kasro]

On the monthly chart bean oil still is cheap. It spent much of 1994 and part of 1995 above 26 cents. It even reached 30 cents, and traded for a few months above 28 cents. Stocks to use in '94 was much higher then also.

During the same period, the Cdn $ was .72 -.74 US. That would make the oil price range .30 to .35 using 1994 dollars.

Can the market trade to these levels today? That is still a 30% increase from where we are today.

What would that do to our canola price?

[rain]

Kasro watch for the possibility of Elnino type drought conditions in Malaysia and Indonesia. If palm oil production is adversely affected, veg oil prices could get exciting. Australia and India are already being affected negatively. As yet I have not been seeing any news about poor weather affecting palm oil production. How about you Charlie, have you heard or read anything about palm oil production?

[rain]

Charliep: I have been spending some time combining in the peace country lately. the crops near Spirit River in appearance are deceiving. Some canola not hurt by early frost is yeilding 45 bus., other nearby is 30 bus. and other is a write off. We combined some that was over 20% mositure and 50% green but it yielded 40 bus. and qualifies for feed or other industrial use.

Wheat was all 18 to 20% mositure and grading mostly feed with some #3.

If there was ever a year not to have a crop this one appears to be the one with the fall that we have had in Western CAnada.

I see you are preparing to cave in on our little wager. Good idea to fatten that piggy bank I'am thinking. What is the magic price per tonne remembering that we have a zero basis for the the $12.00 a bus. wager.

This game of marketing is for fools and millonaires and quess which we are Charlie. See you at lunch in Camrose SOON. The Kernels Marketing Club membership one.

[charliep]

El Nino is a fact (although not as bad as the mid 1990's). It takes about a year to impact palm production, however. Palm oil production has been coming down gradually due to more mature trees/smaller increase in acreage. The other side of vegetable oils is the tremendous growth in world consumption - 4 to 5 %/year versus world population growth of 1.5 %.

A more important fact is the poor 2002 world canola production everywhere in general and Canada in particular. At 40 % ish oil content, the reductions are impacting availability of North American vegoils in particular. I will be watching the US soybean oil S&D for further reductions to carryovers. This to me is why CBT soybean oil is rising.

I hear you Kernel (I know which camp I sit in sometimes - not the millionaire one). Marketing is like babies and diapers - a dirty job but someone has to do it. There are rewards for doing it right.

It is one area of many farmers business where more money can be made with little investment of dollars - just time. My emphasis as I grow older is to worry less about helping people call the market and more about helping them use marketing tools to be consistently profitable. This is one year that has thrown all these theories out the window.

[charliep]

Kasro

You might note that I wimped on your question of magnitude. The trend continues to be up on vegoils. I suspect we are headed higher too fast so am looking for a bit of a pull back short term. Calling for the increase in soybean oil you are calling for seems to me to be premature/need to be supported by something else (eg. problems South America). Perhaps why I am patient.

[Kasro]

Hi Charlie,

I'm not calling the market to reach higher than 30 cents, or even to get there. I don't make those kinds of calls.....at least not publicly! I've been humble far too often by the marketplace! Once burned........

I was just making the point that it has traded for value (not just a quick violent spike) at these levels in the recent past, and that it can again. So I don't view current levels as extemely expensive.

Theoretically, IF soy oil reaches 28-30 cents, meal stays flat, and Cdn$ stays flat......what would the price of canola be? I guess I'm asking you to do a mathematical crush value.

[charliep]

My rule of thumb (other things equal) is that a one cent/lb increase in CBT soyoil adds about Cdn $14/t to canola prices. Adding 7 cents/lb to soyoil (about 22 cents/lb today )would increase the value of canola by about $100/t. I would owe Kernel lunch.

[charliep]

Just for interest for market watchers, it is interesting to watch the CBT soyoil/soymeal spreading that is going on. Being long soyoil/short meal has netted some good returns. Today is showing the beginnning of some profit taking/unwinding of these spreads. Meal demand has also been good and this has started to push CBT soymeal prices higher.

[parsley]

Kernel,
Order lobster.
Parsley

[parsley]

Kernel,

Order it because that darn charliep is rarely wrong. You'll never get another chance.

Parsley

[charliep]

Kernel

I am not ready to pay up yet but if I do, it will be prime rib (Alta. product).

Parsley

There are 3 things that currently keep me humble in life (among others)

The grain/oilseed markets - self explanatory.

Curling - I moved up the ladder last night from the front end (you can miss a shot and still not harm your team too bad) to management (skip misses by a few inches and gives up multiple points).

A teen age god son - At 15, he is way smarter (at least in his eyes) than I am. Luckily, he is mostly right.

[charliep]

Charliep: My guy says that the South American soybean crop is headed for some what of a downer this year. This forcast could carry some weight meaning that it not necessarily weather related proplems. Its related to a pest problem of some sort. Have you heard of any such rumors or truths.