WINNIPEG — If supplies go up, the rule is prices go down. If supplies go down, prices should rise.
That is, unless you’re talking about canola.
Statistics Canada predicted last week farmers will grow 13.1 million acres of canola this year, an increase of 28 percent over last year’s record 10.2 million acres.
Under old rules, that should add up to lower average yields because of the number of new growers entering production and the losses due to farmers’ squeezing rotations too tightly.
But “we had a 20 percent increase last year and a lot of people predicted a decline in production,” said Nick Underwood, crop production co-ordinator for the Canola Council. “It didn’t happen.”
Read Also
Farming Smarter receives financial boost from Alberta government for potato research
Farming Smarter near Lethbridge got a boost to its research equipment, thanks to the Alberta government’s increase in funding for research associations.
The four-year-rotation rule is being effectively replaced by a higher level of management and more disease-resistant varieties, Underwood said.
If average yields of about 22 bushels per acre are reached, that will place 6.5 million tonnes of canola on the market next winter — more than the trade has ever dealt with before.
Theoretically, that’s bearish news for the trade.
But both old-crop and new-crop canola futures posted gains the day of the report. Prices rose across the board the following day, June and March contracts increasing by the $10 limit.
Old-crop traders are responding to the lack of space at inland terminal operations cited as delivery points against the June futures contract. Without the option of delivering, short contract holders are forced to buy their way out of their positions — which is pushing up the futures price.
New-crop prices were buoyed by a strengthening U.S. soybean price and a flurry of buying activity by European traders for delivery next winter. World oilseed supplies remain tight, and the weak Canadian dollar makes canola highly competitive.
Errol Anderson, general manager of Palliser Commodities Corp., said European traders became aggressive buyers in the new-crop canola months the day following the report. That buying could push November canola prices higher and bring competing bids into the market earlier than expected. Anderson is predicting a range of $400 to $430 on November futures.
He’s recommending farmers who have signed deferred delivery contracts on new-crop canola purchase call options as well, so they can take advantage of any price improvements.
