The market is having a hard time making up its mind what kind of acres to buy this spring.
And that’s making it tougher for farmers trying to figure out how much canola to seed and whether to price some of it now.
“Canola acres are seeping out of the rotation,” said FarmLink Marketing Solutions analyst Brenda Tjaden Lepp, who is bullish about 2007-08 canola prices.
“The acreage slippage out of canola has been bigger in the last couple of months than most people are accounting for.”
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This is the season when markets are said to “buy acres” for next year by raising prices in advance of seeding.
But this year, with the price of almost all crops dramatically rallying since harvest, the situation is confusing growers. None of the crop options are real dogs, but some have become more attractive since Christmas. That could affect seeding decisions a month from now.
“Some special crops markets have really moved in the last couple of months,” said Tjaden Lepp.
In mid-January at Manitoba Ag Days in Brandon, most of the hundreds of producers at the Manitoba Canola Growers Association meeting raised their hands when asked if anyone planned to boost canola acreage this spring.
That view made sense then, Tjaden Lepp said, because canola was the most profitable crop choice.
She said, “$8.50 canola was killing everything else. But since then peas are up a dollar. Dry bean prices are up from 22 cents to 26 cents.”
Sunflower prices have surged, oat prices are high and the Canadian Wheat Board Pool Return Outlook for 2007-08 is higher than most expected.
Those better prices in other crops may cause some farmers to seed less canola than expected, she thinks.
That’s where her bullishness comes from: if canola acreage doesn’t increase as most expect, prices in the latter half of next crop year could rise.
“Ideally we would like to wait with all sales until that time period,” said Tjaden Lepp.
However, most producers need to sell some crop off the combine to pay fall bills.
For those harvest sales, she suggests producers look for a spring rally that could occur if her prediction is right that farmers will seed fewer canola acres than they had earlier planned. Such a rally would provide an opportunity to lock in a post-harvest price.
Analyst Ken Ball is taking a more conservative view of 2007-08 canola prices, encouraging producers to lock in a price for some production now, but less than they would in an ordinary year.
“The market potential here is two-way. It’s not a one-way street,” said Ball.
“There are lots of reasons to be optimistic … but quite a lot of the bullish potential may already be in there. It’s time to get your head out of the clouds and get your pen out and be businesslike about it.”
Some analysts have become more bearish recently, worrying that oilseed prices are peaking and that the expectation that biodiesel plants will be operating and buying oilseeds next year may not bear fruit, so oilseed prices could drop as a result.
Ball thinks there is more upside than downside potential for canola prices next year, so he has held back pricing recommendations. But with prices near $8 per bushel, “you can’t turn it down 100 percent. You just can’t turn down prices this good and go on a flat-out gamble that everything will stay bullish.”
Tjaden Lepp said she wants to give the market more time to send pre-seeding signals, not just for price but also acreage decisions.
“I want to keep our clients open to plant the most profitable crops as long as possible.”
