So, the Chinese have threatened to ban Canadian canola after November 15 and the price of canola has dropped $20 per tonne.
Does that mean the market has assumed China will actually slam the door shut on that day and keep it closed? Or does it mean the market assumes the ban will be delayed and the damage limited? Or does it mean the market thinks the whole ban will never happen? Unfortunately the market just gives its answer in the form of one price into which all the factors fall.
Clever market participants will compare nearby and further out months to attempt to suss out whether the spreads reveal significant changes in perceptions. And options premiums may show something about the new views on risks and volatility in canola prices post Chinese letter.
Right now all that’s sure is that people in the market will keep chattering. And everyone will be anxiously awaiting word from the CFIA officials who are going to China this week.
