Is this summer’s canola crop a disaster?
Is it a terrific crop that looks perfect?
Is it patchy?
Is it late?
Is it suffering from wet feet?
Is it doing surprisingly well after a bad beginning?
Is it worse than expected, but hiding its ugliness under a green and yellow canopy?
These are all questions that are tough to answer right now, with canola crops across the prairies in a huge range of states and shapes. It’s pretty hard to gauge what kind of a crop is going to be harvested in September and October.
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So what does that mean for canola markets?
If you think the biggest factor in the canola market is the supply of canola, the answer to that question will have a big impact on the price. Certainly basis levels will be affected by local supply gains or losses, with elevator points short of crop giving farmers reason to deliver, and areas with better than expected going the other way once the threat of scarcity is past.
But the underlying canola price will rely a lot on the total amount produced across the prairies. If canola itself is a major factor in its own price.
But a lot of analysts think canola is mostly just tagging along with soybeans and soyoil, so while supply changes of the canola crop will make it stronger or weaker relative to beans, the biggest influence on canola will be the overall price of soybeans, these folks think.
Others think soybeans won’t matter nearly as much as the overall commodity markets level. If the commodity complex keeps weakening – and it’s dropped a bunch since its late April peak – crops might move around relative to each other, but the general direction will be down.
And what will make the commodity complex move? Most analysts think that will all be determined by three big things: 1) Does China keep growing? 2) Does the U.S. slip back into recession? 3) Does Europe rip apart at the seams?
So which level of influence do you think will be most critical for canola prices: a) canola supplies; b) soybeans and the vegoil complex; c) the commodities complex; d) the state of the world?
That’s no easy question to answer. I’d say it’s going to be C and D on that list of possibilities, but what do I know? Like the rest of you, I’ll find out as the season progresses and we move into harvest and towards the bin.
