Will Canola Catch Another Wave?

[boone]

If farmers know more than analysts, how did they behave last ten days in the Canola Market? And what is the general opinion out there?

[countryguy]

My feeling is that the only place canola is headed is down.There is improved moisture in Canada,the U.S. is getting rain,there is a record crop of beans sitting in South America,and there is a wack of beans to come out of the LDP program very shortly.Add this to the seemingly non existant demand for canola.There is no other way for it to go.We sold most of what was left yesterday and will probably clean the rest out real soon.

[hgb]

I think we could see a rally in canola market right away due to 2 reasons:
1-US beans had a 12 cent gain before closing Friday. (sparked by USDA reports?)
2-Canadian buck may have trouble holding it's 3 month rally, now the Iraq war is under control. (the dollar looses a couple of cents and there's $20/ton)
So I'm looking for a rally to price rest of old crop canola.

[hgb]

There are three things you should watch when determining sell signals:

1) the cash price being paid in Vancouver which is 25 over the July and works out to an 18 under backed off to mid SK. The daily cash prices are available on DTN and wce.ca

2) basis levels - crushers need seed now. ADM Lloyd is bidding 3 under the May for immediate - 10 under the July for June and 20 under the Julyu for July.

3) futures levels - the July is trading carry to the May. May and July are trading 30 to 35 dollars over new crop.

All three point to a sell signal.

Those holding onto old crop canola and old old crop canola are banking on a weather problem in the bean crop in the US or the canola crop in western Canada or the Asian rust taking out more of Brazilian beans than 2.1 MMT.

Canola crush for the week ended April 16 was 44, 850 versus 41,722 last week. Year-to-date totals are now 1,512,091MT versus 1,728,346. To achieve 2.2 MMT of crush for the year we would have to crush 49,136 MT in each and every week from now until July 31 and the likelihood of that happening is low. We have averaged 39,791 MT for each week this year and if we maintain that average will fall 150,000 short of what analysts are predicting for domestic crush.

All this adds up to increased ending stocks. Some in the trade have increased their ending stocks to 600-650K rather than Ag. Canada's 450K.

The vessel ineup in Vancouver over the next 21 days shows minimal requirement for seed. Throw in SARS and you have a nervous market.

BTW beans were up in CHI on Thursday on SARS rumours and that the Brazilian gov. was going to quarantine ships for two weeks creating a delays in the shipping cycles meaning an increased useage in the US. As always, buy the rumour - sell the fact. The rumour proved untrue today. Beans fell 5-6 cents today giving back half of the gains from Thursday are up in overnight trade 1-1.5 cents (10:51 Gap time)