Growers who don’t have pressing cash flow needs should hang onto their canola for a few more months, says a grain industry analyst.
Crushers and exporters are working their way through unprecedented post-harvest farmer deliveries of the oilseed, said Marlene Boersch, a partner in Mercantile Consulting Venture.
Supplies are expected to tighten by March, which should raise prices.
If the early season demand pace is sustained, there will be 6.83 million tonnes of exports in addition to 5.2 million tonnes of domestic crush, leaving only 471,000 tonnes of carry-out.
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“That’s not going to happen,” Boersch told delegates attending last week’s Agri-Trend’s 2010 Farm Forum Event in Saskatoon.
“That means the world still needs some price rationing.”
Despite impressive demand prospects for the crop, canola prices haven’t been following the upward swing in soybean prices as closely as they should have.
That is because farm deliveries of canola have consistently outpaced demand since week seven of the 2010-11 crop year.
“We’re running a little ahead of the need of the exporters in spite of the unprecedented usage and that is reflected in the basis,” Boersch said.
Farmers have limited options for paying their bills because of the unattractive initial prices offered by the Canadian Wheat Board, she said.
Farmers had sold $1.8 billion of canola and $330 million of peas as of week 13, compared to $180 million of spring and durum wheat.
She said well-supplied canola companies will eventually work their way through the excess deliveries.
“Once we get into March things will become tighter. There’s just no two ways about it.”
She told growers to set a target sell price of $12.50 per bushel if they are able to handle their cash flow needs without selling all of their canola.
She also advised them to forward sell 25 percent of next year’s crop at new crop prices of $11, which should cover most of next year’s fixed costs.
Boersch said flax prices could reach $18 per bu., but growers shouldn’t turn their noses up at recent quotes of $16. Some sales should be made if new crop flax prices are $12 per bu.
