canola price

[furrowtickler]

Sure was huge yields on below average general rainfall .... again for the 3rd year in a row .
Amazing crop I guess ...
maybe if we have even a drier year this year we can break yield records yet again and get carry out to 7 mil ? Lol

[TechAnalyst]

Although there are obviously plenty of reasons to be concerned, the only certainty about marketing and price forecasting is it helps to take emotion out of the process as much as possible. With that in mind, I would like to point out a few factors to keep in mind.

Even experts (if you want to call them that) don't want to look like idiots in front of crowds. To that end, usually speakers tend to justify the recent price action, not stick there neck out and suggest why prices may do something other than what they're doing. In short, disregard the 6MMT.

Contrarians believe the most likely time for a price reversal is when the majority are in agreement of a price direction. Besides public opinion, one way of measuring that is with the Commitment of Traders data. It currently shows Managed Money Traders (large speculators) currently have a significant net short position of almost 50,000 contracts or 1 MMT. Commercials are on the other side of the trade with a net long of a similar amount. The commercials are buyers for risk management purposes and as such are reluctant to sell when prices start to rise. The money managers only care about profit and tend to be very aggressive buyers (in a case like this) if or when something changes. This leaves a short term imbalance of aggressive buyers and reluctant sellers with sharp price moves common. Some of the most significant price swings occur when this group covers or even reverses their position. As annoying as this all is, it may be the key to a bounce this spring that could allow attractive pricing opportunities.

Looking at China, remember they didn't ban Canadian canola imports, just removed one supplier. They are extremely shrewd traders that need oilseeds given the lack of soybean imports from the US. When the smoke settles, they may have used the price break to purchase significant quantities from the alternate sources. They have executed similar strategies in the past and it can't be ruled out for now.

Regarding the latest official estimates, Ag Canada is predicting an 18/19 carryover of 2.5 MMT with the same forecast for 19/20. This would be unchanged from 17/18. The USDA is slightly more bearish at 2.7 MMT for old crop and 2.55 MMT for 19/20 (new crop).

According to weekly grain handling statistics up to March 10th, exports are only off .537 MMT (8.6%) from last year vs an Ag Can estimate for a .4 MMT increase on the year. On the other hand, crush is running slightly ahead of last year compared to estimates for a .1 MMT decrease. Although there could be an increase in the carryover from the latest Ag Canada estimates, it may be nothing more than what the market has already factored in.

In short, politics, weather and planting decisions will have a huge say in how this plays out but keep in mind there are plenty of bullish factors for traders to focus on if they decide to. (For example, acres cut due to all the recent turmoil, drought conditions continuing then a realization that China didn't actually reduce total purchases) Such developments would likely inspire the managed money traders to cover their shorts, providing a nice rally to price into.

To be clear, I'm not bullish, just suggesting the bearish sentiment may be overdone and highlighting reasons why we could see opportunities to sell into rallies yet this spring. Given the significantly high US soybean carryover levels, I would recommend keeping your expectations realistic and your target prices set ahead of time.

[farmaholic]

Thanks for that glimmer of hope.

[Guest]

Nice little pop in canola today. Feels good