The bad news was mostly expected and when it arrived it had the effect most people had predicted: canola prices sank deeper into the slough.
Statistics Canada announced Feb. 2 that prairie farmers were holding far more grain of all types, including canola, at the end of 2004 than they were in 2003.
The 5.4 million tonnes of canola in farm storage is about 1.4 million tonnes or 35 percent more than they held at the end of 2003. Farmers produced more canola in 2004 and have hoarded it, darkening the prospects for the rest of 2005.
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Canola futures prices on the Winnipeg Commodity Exchange fell below $250 per tonne into what may become a lower range of trading.
The most hopeful outlook for canola prices came from canola industry analysis firm Ag Commodity Research, but it didn’t predict a quick end to low prices.
“It’s tough to be overly bearish as we are probably in the bottom five to 10 percent of the WCE’s price range this year,” said Nolita Clyde in her weekly canola market report.
Farmers are unlikely to benefit much even if canola futures prices stabilize or improve because the cash market is likely to get worse. Attractive basis levels are partly offsetting bad futures prices, but the basis is likely to deteriorate if the futures improve.
“WCE prices may eventually stabilize somewhat, but basis levels may decline to more normal levels for this time of year,” Clyde said.
Marketing adviser Brenda Tjaden Lepp said farmers shouldn’t take this year’s excellent basis offers for granted because they could be withdrawn any time. Farmers don’t need to lock in futures prices if they don’t want to, but good basis deals should be grabbed.
“There’s no question that a $10-over basis in Manitoba is an outstanding basis,” Tjaden Lepp said about a price that has appeared a few times since harvest.
“Those should be sold. Don’t hesitate to commit 100 percent of your crops in the bin to one of those basis contracts.”
