Opportunities to price this fall’s canola crop will come and go all year, but locking in larger portions at a reasonable margin might be a little tougher find later than they are today.
The two-month increase in canola that took November futures from the $495 per tonne mark to the $520 range last week, and returned them again on March 16 and 19, was built on a soft dollar and recent soy oil prices.
But, like everything else in this supply-rich environment, the current pricing opportunity hinges on weather someplace in the world.
“Meal is doing the heavy lifting for canola right now. While meal doesn’t pay all the bills (with canola), it does pay the freight. Provided you can get (rail) cars,” said markets analyst Bruce Burnett of MarketsFarm, a Glacier Media company, also owner of The Western Producer.
Argentina’s crop has been under heat and drought pressure for most of its season and, combined with the country’s tariff programing, that country will be processing every available pound of soybeans it produces. The result has the market speculating that soy oil might be a little short, and canola meal has been the beneficiary.
A Canadian dollar that remains soft has helped support the price, falling below last June’s 77 cents U.S., and headed lower on March 19, losing about a third of a cent from the pre-weekend close on March 16.
American Federal Reserve news this week is expected to announce a 0.25 percent rise in interest rates, further strengthening the U.S. dollar and keeping the loonie under pressure to go lower.
Burnett said he feels “fair value for the (Canadian) dollar might be in the 74 to 76 cent (U.S.) area.”
The combination of a low dollar and what might be a temporary weather market related to Argentina’s low yields could be creating a good time for producers to consider pricing some of their canola, he said.
“You can’t always get $11 (per bushel) canola when you want it. So, penciling in a profit in a year with a lot of other uncertainty out there and otherwise strong supplies can be a good decision on the farm,” said the market analyst.
Analysts point out the more unpredictable-than-usual nature of the international markets due to a potential trade fight between the U.S. and China, as well as the European Union, adds one more variable to any marketing plan for the coming crop.
On March 16, the European Commission let the U.S. administration know which products might be in its sights for retaliatory tariffs in response to American steel and aluminum import tariffs. So far corn, wheat and soybean products were not on the list.
The spring run up in the crop commodity markets, ahead of South America’s crop being in the bag, has created additional optimism among producers and that appears to translating into a shift in American planting intentions, say some analysts.
Burnett feels that while Argentine soybeans have been making headlines, the real story might be its corn.
Export tariffs have been reduced on its corn and wheat, so the country will likely wring every ounce of oil from its soybeans domestically and ship out the cereals for hard currency.
The drought has badly damaged the corn crop and that could create some opportunities or at the least some optimism in American producers.
Should those growers go to the field early this spring, and if corn prices remain close to where they are, an anticipated drop in American acres, such as the one outlined in the USDA Outlook of two weeks ago, and corresponding rise in soybean plantings, might not take place.
“We are still talking about some very large supplies and carry-out stocks, but the picture could be a bit different than many people imagine it right now,” said Burnett.