Do you need cash, or can you wait for the chance of better prices?
That’s the question Errol Anderson, who runs Pro Market Wire Report, thinks canola growers need to ask themselves.
Both the old and new crop offer producers a chance to look for improving prices.
“The market is really paying you to store it,” said Anderson, noting the November futures contract is higher than current prices.
“But it’s a cash flow-bin space decision for the grower. If we don’t have to worry about money, I would store it. But I know a lot of people can’t do that.”
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Next year’s canola crop is forecast by most analysts to fall substantially shorter than average. That is pushing future prices higher.
By keeping old-crop canola into the new crop year, producers are expected to be better off by several dollars a tonne.
However, if a farmer needs money now or needs to clear bin space, selling soon is a good idea, Anderson said.
That’s because canola demand can slump in early summer, which could wipe out some of the present good prices.
“Even though we’re tight long term (for canola supplies), June can still be a dog,” said Anderson.
Today’s prices of $290 per tonne or better should be seen as a selling opportunity for those who need cash.
“If you need bin space and have to move it, I’d probably try to get it swept clean,” said Anderson.
For new-crop canola, the best opportunity is to hold it in the bin until next spring.
“A year from now it could be interesting,” said Anderson.
“If you’re OK (for cash) and can just store, there’s a real potential that spring 2002 is going to be a squeeze.”
But most farmers will need some canola revenue next fall. Anderson said the November and January futures contracts are attractively priced.
A deferred delivery contract could lock that in.
“If they need cash flow right off the combine, any time it pushes $300 or higher, they should maybe do some deferred delivery.”
For producers who need money before Christmas, prices of $300 per tonne “should be viewed as a bit of a sell.”
