WINNIPEG – Farmers kicking themselves for waiting too long to lock in canola prices should avoid panic sales, take a deep breath and start their strategy anew, say market analysts.
Brenda Brindle of KenAgra Management Services in Edmonton said the company’s clients had at least 50 percent of their canola priced before the crash because they took advantage of good prices and paid attention to warning signals.
“Whenever you get everyone convinced things should be going up, up, up, you better stop and question,” she said.
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Brindle said people erred in the past two months by focusing solely on short supplies without looking at the bigger picture of world vegetable oil supply and demand and Canadian crushing margins.
November futures closed at $428 per tonne on Oct. 9. By Oct. 18, they had plummeted to a close of $399 per tonne, a drop of $29 per tonne or 66 cents per bushel.
Rather than dwelling on lost opportunities, Brindle said farmers should clean their slates and start again.
Analysts believe there are still good selling prospects once demand picks up in late winter or early spring, after world vegetable oil supplies are drawn down.
Mike Jubinville of Growers’ Marketing Services in Winnipeg said earlier in the year, many people in the trade had expected prices up to $480 or $500 per tonne.
Now, it looks more likely that prices will eventually rise as high as $450 per tonne. Jubinville said farmers still have a chance to get cash prices of $10 per bushel.
But it’s important farmers sell small lots into price rallies rather than holding all their canola for the peak.
“If a guy thinks he can pick a top of the market, all I’ve got to tell him is, ‘Good luck,’ ” said Jubinville.
He said he wouldn’t be surprised to see prices drop by as much as $20 per tonne before Christmas.
If farmers need to sell canola now, they should look at replacing part of their sales with call options, he said. Premiums for the March contract are around $11 per tonne for $420 canola, and $8 per tonne for $430.
