Farmers need to aggressively seize any coming market rallies to clear old-crop canola, say market analysts.
Present prices for old and new crops may be disappointing compared to last fall, but there is little chance of recapturing those highs.
“Those opportunities are to a large extent gone,” said broker Ken Ball of Benson Quinn-GMS.
Farmers who still have unpriced canola in their bins need to take advantage of any positive futures price swing because there is significant downside potential.
“The market’s already done what’s obvious – the markets are not going to match last year’s prices,” said Ball.
Read Also
Russian pulse trouble reports denied
Russia’s pulse crop will be larger than last year, which won’t help prices rally from their doldrums.
Weather will drive the market from now on, analysts said. Statcom Ltd. said canola has been looking for its price direction from American soybean markets because there has been little new canola information.
The United States Department of Agriculture’s April 10 supply and demand report failed to move markets because its results were in line with analysts’ expectations.
Good weather, which will likely produce a much bigger 2003 canola crop, would knock down prices for old and new crop, analysts said.
Many farmers spurned the fall rally and subsequent weaker rallies, holding on for a mega-rally, Ball said. They have paid the price for that reluctance to sell and may still be unwilling to part with their crop.
“They’re caught in a trap that I can’t help them out of,” said Ball.
“The trap is that they’re always hoping for more. They’re never going to catch a rally. The markets have offered them multiple, multiple opportunities, but the way they’re approaching the marketplace almost guarantees that they won’t seize those opportunities.”
Errol Anderson of ProMarket Communications said farmers may be able to lock in $9 per bushel cash prices if futures prices rally and the basis gets better, but that would be the top price.
The best hope for achieving that is with a rally in the July futures contract price for June delivery with a friendly basis. Anderson said canola crushers have begun getting much better margins recently and have offered good basis levels to attract canola, some as much as $5 per tonne.
Anderson expects the July contract to float in the range of $365-$400 per tonne, depending on weather.
Ball said bad weather could shove up canola by $40-$50 per tonne, but good conditions could push it down by the same amount.
Anderson cautioned farmers not to think canola supplies are short.
“They’re not,” Anderson said.
“The grower doesn’t have the hammer, so he really has to be ready to price when he can. Get her done.”
Anderson said good weather this summer could easily push new-crop canola prices down to $320 per tonne on the November futures contract, so if farmers see prices of $360-$365 “they should consider hedging.”
Ball said the strength of the Canadian dollar has been sucking the wind out of canola’s sails. As the loonie becomes more valuable, farmers’ prices drop because international sales are made in U.S. dollars. That problem may continue.
“The dollar looks like it has the potential to do some real damage,” said Ball.
He said he was confident that new-crop prices would stay above $300 a tonne, but the strength of the Canadian dollar worries him.
The fundamentals of supply and demand don’t hold too much danger, but “the Canadian dollar is really opening up that downside.”
