Canola strategy.

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Canola strategy.

blackpowder's Avatar Feb 21, 2020 | 10:36 1 OK. Marketing question. Surprise!!
My remaining inventory is mostly hedged in the markets.
Futures price at sale time still has relevance though.
I'm thinking about locking in basis soon though. Yes, sometimes you do that and later on somebody has an emergency ship to fill and throws $ at the basis to fill it.
But, barring that potential. I see basis only getting wider moving forward.
Locally, we lost $20 overnight last spring. Looking like going to get worse before better. And for a while.
What say you?? Reply With Quote
GDR
Feb 21, 2020 | 10:42 2
Quote Originally Posted by blackpowder View Post
OK. Marketing question. Surprise!!
My remaining inventory is mostly hedged in the markets.
Futures price at sale time still has relevance though.
I'm thinking about locking in basis soon though. Yes, sometimes you do that and later on somebody has an emergency ship to fill and throws $ at the basis to fill it.
But, barring that potential. I see basis only getting wider moving forward.
Locally, we lost $20 overnight last spring. Looking like going to get worse before better. And for a while.
What say you??
I'm guessing spring thrashed canola will mostly hit the market at the same time, likely cause some over supply issues. Already hear some chatter about spring thrashed feed grains, likely just trying to talk the market down but canola will be next. Reply With Quote
Feb 21, 2020 | 12:25 3 We farm close to a crushing plant that is good to deal with and most years the best prices are in the spring about the time you are busy seeding. There isn't much canola to spring thrash in the NE so i don't think that will be an issue here.

Last year was an exception to best price in the spring rule with that China problem popping up and i am hopeful this spring gets back to old habits. Reply With Quote
Feb 21, 2020 | 18:24 4
Quote Originally Posted by seldomseen View Post
We farm close to a crushing plant that is good to deal with and most years the best prices are in the spring about the time you are busy seeding. There isn't much canola to spring thrash in the NE so i don't think that will be an issue here.

Last year was an exception to best price in the spring rule with that China problem popping up and i am hopeful this spring gets back to old habits.
those 2 quarters of canola on the way to carrot are completely gone , elk have taken every swath Reply With Quote
  • 1 Like


  • Feb 21, 2020 | 18:30 5
    Quote Originally Posted by caseih View Post
    those 2 quarters of canola on the way to carrot are completely gone , elk have taken every swath
    Yes i notice that also. That will get combined with a heavy harrow! Reply With Quote
    SASKFARMER's Avatar Feb 21, 2020 | 20:34 6 That guy will get a ok pay day because what ever it yielded last fall x price today thanks to wildlife Reply With Quote
    fjlip's Avatar Feb 21, 2020 | 21:07 7
    Quote Originally Posted by caseih View Post
    those 2 quarters of canola on the way to carrot are completely gone , elk have taken every swath
    Thank you the ELK! Doing all they can to REDUCE supply! Reply With Quote
    helmsdale's Avatar Feb 21, 2020 | 21:15 8
    Quote Originally Posted by fjlip View Post
    Thank you the ELK! Doing all they can to REDUCE supply!
    Can guys strap "antlers" to their cows and call it wildlife damage? Reply With Quote
  • 2 Likes


  • Feb 21, 2020 | 23:09 9 If cold dry and in bin ......
    Reply With Quote
  • 3 Likes


  • Feb 21, 2020 | 23:12 10
    Quote Originally Posted by blackpowder View Post
    OK. Marketing question. Surprise!!
    My remaining inventory is mostly hedged in the markets.
    Futures price at sale time still has relevance though.
    I'm thinking about locking in basis soon though. Yes, sometimes you do that and later on somebody has an emergency ship to fill and throws $ at the basis to fill it.
    But, barring that potential. I see basis only getting wider moving forward.
    Locally, we lost $20 overnight last spring. Looking like going to get worse before better. And for a while.
    What say you??
    I'll say you are on the right track. Will try to keep this summary as unbiased as possible to let everyone decide for themselves. We all have differing risk tolerance and breakeven/profit needs.

    Pros

    Eventually China will need grains, the port shutdown and backlog shipping "should" mean increased demand as soon as they can realistically get back to business. They haven't quit eating, while they have stopped buying consumer items. It should be balls to the wall when trade resumes. Sidenote: there is no Chinese bean counter that's willing to say "boss the bin is empty" today. Their stocks are unknown as no govt employee goes above and beyond to do someone else's job and drive to the next bin to tap on it.

    Currency... eventhough CAD hasnt moved much, USD has. Weaker loonie means we are more appealing then other sources, regardless the destination.

    The unfinished harvest.... we don't know total crop size, it's smaller then previous estimates, likely by a bunch due to heating and wind damage, wildlife etc. Likely 20%~ less on what's still in field if factoring in spoilage.

    Seasonals ... its the time to rally. Rumors of early spring and a return to field might diminish it slightly but we should get a bid.

    Baltic dry index ... looks like it's heading for the shitter, just need to get the boat full. Nuff said.

    Brexit... the EU can't fund current govt programs with no Britain. Life will change for EU producers.

    Locusts ... everyone knows these things are cyclical, question is, is this year 1 of 3? Or 1 of 1? "Here" we know they build and don't vanish right away. It might be worse next year.


    Cons

    Palm oil is crashing, soy oil kinda holding on at the moment and beans are hanging in, all things considered. Have a look at May vs Nov futures, support is hiding in the second last low, not the most recent. Call it 477.5 on Nov Canola. That's the daily close we need to watch as the give up point.

    Commitment of Traders, there's room for them to lean on it to the downside pretty good, enough we will cringe.

    Macros, strong USD, bonds, equities and most likely rate cuts around the world in the face of reduced demand for just about everything due to flu. I'll list civil unrest in Canada blocking rail in this category as well.

    MFP 3, its deflationary for grains, market will drop based on the amount of subsidy til it hits cost of production

    Stocks... there's no shortage. So any rally is going to be based on demand not supply, meaning it'll be short lived.


    My wild ass guess on the back of a napkin says there's one more push coming, I'm not saying how high but if it happens before RSX20 cuts through 477, we need to be aggressively selling to the degree that it's comfortable for your own position. Im still of the opinion the extension and increase in cash advance limits has done nothing but extend the inevitable of the crash. We would be on the way out of the hole right now if this didn't happen. First possible bottom being the day after the loans are due. Assuming we don't see canola on canola this spring locally. Until it's cut to 1 in 3 or 1 in 4 as part of the rotation we will see lower prices. Historically the lowest prices come the day the drill hits the field. Nothing pencils on that day, and rash decisions get made. Not sure this helps but might highlight some of the overlooked items. Reply With Quote

  • Feb 22, 2020 | 00:39 11
    Quote Originally Posted by helmsdale View Post
    Can guys strap "antlers" to their cows and call it wildlife damage?
    In addition to the antlers, we will also need to go out and gather up all the cow pies, and reshape them into little easter egg shaped nuggets in order to pull it off.
    Helpful hint, they are easier to gather when frozen, but be careful if you are using the kitchen table for reformulating them into deer droppings, work fast, or they will thaw out, and you may have some explaining to do... Reply With Quote
    Feb 22, 2020 | 08:48 12
    Quote Originally Posted by SASKFARMER View Post
    That guy will get a ok pay day because what ever it yielded last fall x price today thanks to wildlife
    No it was frozen shit came up in july
    You woulda drove by it when you went from arb to carrot was started blooming in august
    Never had a combine in it i dont think Reply With Quote
    Feb 22, 2020 | 08:54 13
    Quote Originally Posted by macdon02 View Post
    I'll say you are on the right track. Will try to keep this summary as unbiased as possible to let everyone decide for themselves. We all have differing risk tolerance and breakeven/profit needs.

    Pros

    Eventually China will need grains, the port shutdown and backlog shipping "should" mean increased demand as soon as they can realistically get back to business. They haven't quit eating, while they have stopped buying consumer items. It should be balls to the wall when trade resumes. Sidenote: there is no Chinese bean counter that's willing to say "boss the bin is empty" today. Their stocks are unknown as no govt employee goes above and beyond to do someone else's job and drive to the next bin to tap on it.

    Currency... eventhough CAD hasnt moved much, USD has. Weaker loonie means we are more appealing then other sources, regardless the destination.

    The unfinished harvest.... we don't know total crop size, it's smaller then previous estimates, likely by a bunch due to heating and wind damage, wildlife etc. Likely 20%~ less on what's still in field if factoring in spoilage.

    Seasonals ... its the time to rally. Rumors of early spring and a return to field might diminish it slightly but we should get a bid.

    Baltic dry index ... looks like it's heading for the shitter, just need to get the boat full. Nuff said.

    Brexit... the EU can't fund current govt programs with no Britain. Life will change for EU producers.

    Locusts ... everyone knows these things are cyclical, question is, is this year 1 of 3? Or 1 of 1? "Here" we know they build and don't vanish right away. It might be worse next year.


    Cons

    Palm oil is crashing, soy oil kinda holding on at the moment and beans are hanging in, all things considered. Have a look at May vs Nov futures, support is hiding in the second last low, not the most recent. Call it 477.5 on Nov Canola. That's the daily close we need to watch as the give up point.

    Commitment of Traders, there's room for them to lean on it to the downside pretty good, enough we will cringe.

    Macros, strong USD, bonds, equities and most likely rate cuts around the world in the face of reduced demand for just about everything due to flu. I'll list civil unrest in Canada blocking rail in this category as well.

    MFP 3, its deflationary for grains, market will drop based on the amount of subsidy til it hits cost of production

    Stocks... there's no shortage. So any rally is going to be based on demand not supply, meaning it'll be short lived.


    My wild ass guess on the back of a napkin says there's one more push coming, I'm not saying how high but if it happens before RSX20 cuts through 477, we need to be aggressively selling to the degree that it's comfortable for your own position. Im still of the opinion the extension and increase in cash advance limits has done nothing but extend the inevitable of the crash. We would be on the way out of the hole right now if this didn't happen. First possible bottom being the day after the loans are due. Assuming we don't see canola on canola this spring locally. Until it's cut to 1 in 3 or 1 in 4 as part of the rotation we will see lower prices. Historically the lowest prices come the day the drill hits the field. Nothing pencils on that day, and rash decisions get made. Not sure this helps but might highlight some of the overlooked items.
    Sure do appreciate your well researched insight into the market along with 101 and others ! Reply With Quote

  • Feb 22, 2020 | 10:14 14 Here's a fwiw tid bit, haven't seen this mentioned by an expert but something ive found personally that hasnt done me wrong yet. July futures, traditionally when looking at a monthly futures chart, when the market is in a bullish long term posture, it will set a "high". There's been a couple instances where it's made the high but then the bottom wouldn't hold and it created an outside reversal lower, these aren't 100% sell signals at the time but they should change your overall degree of "what's realistic" and reduce your expectations relative to last year. This previous July we set a low, meaning the market is off kilter, change your expectations on when the high is coming and reduce your price targets. When we get back to "normal" July futures will produce the high again, it wouldn't surprise me 1 bit if the cycle does an inversion and instead of pulling back moderately on the roll into Sept futures it'll keep on trucking. The only signal you need to is the month of July showing higher then June on a monthly continuous chart, the June low also needs to hold in relationship to July. I rarely have anything left to sell at that point as cost of carry and risk is too high for me, I just pay attention to set my mood for the upcoming sales, nothing more. If there's a bull story developing, it'll show in July first, you can also adjust your yield expectations based on it. This works for me, which may not work for everyone but sometimes if you reduce everything to its simplest form, it makes the unpredictable a little easier to follow. Major trends are always set at the monthly level never daily or weekly, don't look too close and get blitzed by emotion. I use 1 other simple signal, the first week of flowering, if my temps don't exceed 25C that week, yield will be higher then average and price lower. Use what works for you. Reply With Quote
  • 1 Like


  • Feb 22, 2020 | 15:02 15 July 2020 contract plotted against previous 5 year seasonal
    Name:  seasonal canola.jpg
Views: 320
Size:  56.7 KB
    https://www.barchart.com/futures/quotes/RSN20/overview

    Cash values for NW SK
    Name:  Cash Canola Jul 2020.jpg
Views: 320
Size:  67.4 KB
    https://www.pdqinfo.ca/ Reply With Quote
    Feb 23, 2020 | 16:10 16 Re USDA Ag Outlook Forum

    I realize there aren’t many fans of the USDA out there (for good reason) but they do have the final say that the trade relies on. As such, it is worth considering what they presented on Thursday and Friday (Feb 20/21) at their Ag Outlook Forum. It was their first real look at the 2020/2021 crop year.

    Of particular importance to canola was the soybean and soybean oil estimates. Even though they expect almost 9 mil ac more soybeans to be planted this year, with the sharp reduction in old crop carryover (so new crop beginning stocks) and an increase in exports, 20/21 ending stocks are only forecast to be 320 mil bu. Compared to 909 mil bu in 18/19, one can see how the market will be much more sensitive to any sort of weather issues than over the past few years.

    That would actually fall to 235 mil bu if soybean exports returned to the 2017/18 level (that is supposed to be the reference point for Chinese imports to increase from).

    The other issue could be yield. The USDA used 49.8 bu/ac compared to 47.4 in 19/20 and 50.6 the year before. Should yield equal last year with all other estimates unchanged, the carryover would decline to 120 mil bu. That would come close to the 13/14 ending stocks of 92 mil bu that resulted in soybean record high prices of $17.89/bu US.

    I am not suggesting such an outcome but it illustrates why the market will be so sensitive to weather.

    Regarding soybean oil, they pegged ending stocks at 1.55 bil lbs vs 1.515 bil lbs at the end of 19/20. This is important because they assume exports will have to be cut by 300 mil lbs to maintain that level of stocks. It is also 843 mil lbs below the exports of 17/18 (that are again the reference point for China).

    In short, should the USDA’s outlook come true, soybeans and soybean oil have the greatest potential for a significant rally this year – obviously opening the potential for canola as well. Reply With Quote