In past, have large canola seeded acres every had good prices after harvest?

[poorboy]

With the talk of large canola acres to go in the ground it has me wondering if the price will hold up (assuming average crop).

My memory can't recall what happened the last few times we have had large seeded acres. Or was there always a crop that did better?

[charliep]

I will highlight a monthly WCE canola chart and some historical S&D's to aid with discussion.

http://futures.tradingcharts.com/chart/CA/M

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sdd5325?opendocument

Comments/ideas for discussion.

1) What is going on in product markets (particularly vegoil) has more to do with Canadian canola markets that western Canada production. Whether we like it or not, canola can be substituted in most markets with other oils/oilseeds. On the other hand, some of the years of highest canola prices (1997 to 1999) have been the years of largest production.

2) The demand side is critical over the next year. Understanding China and their policy is critical. Livestock disease issues (both BSE and avian flu) also have the ability to have a major impact the meal markets over the coming year.

3) The relationship between how aggressive grain companies/crushers are in forward selling new crop and the amount of this business they want covered by farmers in terms of deferred delivery and basis contracts. My sense (don't have as much contract with markets as in past) is that new crop basis levels are about $10/tonne wider than has been the case in previous years this time of the year.

4) A clear separation in everyones mind between being profit focused/managing risk and trying to call the market to get the best price. From there, a disciplined marketing plan that sets price targets and actions.

[cropduster]

Charlie,what`s your prognosis of the Brazilian bean crop?From the seat I was in it looked like they had immenent storage problems ! Am thinking some of our market `signals` here aren`t necessarily true...ie..CWB BSE.......

[charliep]

Cropduster

I wasn't able to be at the Brazilian talk at Farmtech and was not able to find the speech in the proceeding. There are many infrastructure issues that Brazil is dealing with including transportation and storage.

In terms of crop, Brazil's estimates have been coming down somewhat with current closer to 57 to 58 mln tonnes versus 60 mln previously and total South America less than 100 mln tonnes. Harvest has begun in some areas of South America and carries on until June (large area north to south with lots of geographic separation and differences in cropping patterns including double cropping with wheat). Still time for some weather impact although seems production forecasts reasonable (with all the normal market noise of too dry here and too much rain there).

The situation I will be following most closely is the US soybean balance. 2003/04 is a year of a smaller crop that has mostly been sold and delivered early. How US supplies are rationed and the level of imports will be critical issues. Implication is that oilseed prices will react differently within North America than the rest of the world. This has implications for both canola and soybeans.

[TOM4CWB]

Poorboy;

I recall last year at this time, the conventional wisdom was we were headed for $300/t Canola prices with a low $280/t possible.

Nov. 04 futures have stood well at over $340/t, and are buying more acres @$360/t while domestic barley and wheat Oct 04 markets have not been competitive at all in this BSE subdued market.

A big shocker will be on exactly how many acres we are actually going to plant of pulses/oilseeds... as Cerials are dismal in future forcasts...

CDN $ forcasts are one reason... CWB does not seem to have risk management in place yet to secure this problem, which brought our wheat in at $30/t below Ausie wheat prices this year(03 crop). I suppose the CWB is counting on the C$ dropping to make up for last year... which is another wildcard.

We all agreed 2 years ago, that $7.00/bu was a fair price for Canola, is this now $8/bu, or is $10/bu now the target?

In the new crop, will $10/bu for commercial Canola compete against South American Beans at $6/bu?

[poorboy]

$8/bus canola or higher will work for me!

It is extremely dry here yet and I am scared to lock in any basis contracts because if it stays dry and I have to buy them out it may cost me $18/t if we have a major drought. If we have a good crop and I have no basis contracts then I am scared of having $7 canola, in which case I probably wouldn't have seeded it.

I am extremely bullish on wheat for this coming year and I actually think that cereals acreage will be up. Barley also looks like a winner, with a shortage of US corn and a larger cattle herd they must eat something. Feedlots will drop the price of calves until they can factor in a profit and then they will start filling the lots. These calves will consume lots of barley. The difference for most barley growers is that the peak demand will be later on in the year or spread out more evenly, unlike most years when February through June are the peak barley useage months.