Canola Prices

[charliep]

Lots of mention of prices in the various threads including $554/tonne and $600/tonne so I am going to post as a new thread. I am not so much concerned about absolute prices/crop production potential but the everyday decisions you guys make in your businesses and the risk management strategies you use. To highlight my definition of risk (not others), risk management is giving up gain to protect against pain.

I will acknowledge the smaller crop coming even with average. Next Tuesday will provide a better indication of acreage - will let other play the yield guesstimate game. The will be rationing among the various customers. Higher prices do not create more production so the real issue will be who leaves the market/moves their business elsewhere or exists the market altogether. Demand destruction as one of you called it a month ago or so.

I will highlight three charts. Canola you can discuss/come to your own conclusions. Soybean oil (CBT) needs to be followed - don't know if canola futures can move to $600/tonne with 32 cent/lb soyoil futures. The loonie is the other feature to follow. I am going to post monthlies - you can go to the weeklies if that makes your point better.

[URL="http://www.farms.com/markets/?page=chart&sym=RSX15&domain=farms&display_ice=1&e nabled_ice_exchanges=&studies=Volume;&cancelstudy= &a=M"]canola[/URL]

<a href="http://www.farms.com/markets/?page=chart&sym=ZLV15&domain=farms&dis play_ice=1&enabled_ice_exchanges=&studies= Volume;&cancelstudy=&a=M">soyoil&l t;/a>

<a href="http://www.farms.com/markets/?page=chart&sym=D6Z15&domain=farms&dis play_ice=1&enabled_ice_exchanges=&studies= Volume;&cancelstudy=&a=M">Loonie&l t;/a>

[charliep]

I will also highlight the inverse in canola futures and effectively flat price in ddc contracts. I suspect that the market may rally short term but in the past in similar situations, markets have made their highs in the summer/fall.

[TOM4CWB]

Dear Charlie,
Looks to me that Resistance $600 and then at $650 will be hard to break on the monthlys.

If our canola crop drops to half of expected... we go to a premium market with crushers fighting over the seed to fill precontracted sales. Soy and Corn at that point are not going to stop the canola from topping at $700/mt (if lack of rainfall cuts canola production by 50 percent).

[bucket]

You don't understand pain charliep.

There are guys with 60 buck an acre seed and close to another 150 bucks in fertilizer and spray fuel etc.

They have probably priced some of their crop at 10 bucks only now to realize their whole 10 bpa crop is priced.

You do they math. Where does another 150 bucks an acre come from in using the market to protect against pain?.

A ****ing nickel a bushel isn't going to cut it. And if your theories are so well proven why are you not drinking on a beach somewhere?

Not arguing and I apologize in advance if I seem rude.

But if you still work for the alberta government do your alberta posters a favor and tell your bosses how ****ed up it is in the country.

[freewheat]

Soy and corn is not going to mean a thing, if domestic canola is short. Not a thing. Yorkton can not crush soy or corn.

[sumdumguy]

Gold will be king -cash will be king-grain will be king----take your pick.

[Braveheart]

If bean oil doesn't pick up expect to see a lot of crush plants close for "maintenance".

Basis will really suck with futures volatility and lack of demand. Sell futures or own puts.

Expect a winter of inverse months.

[Braveheart]

Lots of things might be King, but bean oil will be Jester.

[charliep]

I once heard an expression from my days at UGG (was in reference to selling inputs) - If you are loosing money on every unit you sell, you don't make up profit margin by selling more volume. I will also highlight higher prices will not make more production so if I was a export buyer, I would be chasing the market right now. I would be looking for supplies elsewhere. If I was a buyer/short the market, then a different story. Same comments farmers. Higher prices will not offset low yields in terms of what is important - profit potential. Production risk is a matter for crop insurance with a highlight for Alberta farmers you do have the variable price benefit.

[TOM4CWB]

Charlie,

I am amazed the variable price benefit remains. What a total gamble for insurance reinsurers... is this actually part of the assessment for the 1 in 100 year events we have each decade???