Going into tomorrow’s WASDE, there is really one thing riding on the possibility of canola prices going higher / slash back to the values seen earlier in the week. The sales recommendation made on Thursday, March 1st last week was a good one as most farmers told us that the targets that they put in were either triggered the next day on Friday, or the this most recent Monday.
Ultimately, the main thing that we’re watching going into tomorrow’s WASDE is Argentina. Late on Sunday this week, , we gave a historical perspective of what happens to canola prices when Argentina’s soybean production drops significantly.
Then, today, we gave further analysis of our expectations for tomorrow’s WASDE for canola prices. Ultimately, if the USDA drops Argentine soybean production more than 6 million tonnes, we could see some solid fireworks to the upside. This means that the USDA’s soybean production number would have to drop below 48 million tonnes, from their 54 million-tonne handle they provided in the February WASDE.
Thus, tomorrow morning, we’re recommending that you put in targets with your preferred canola buyer that would expire on Friday end of business day.
Specifically, for the remainder of the unsold 20% 2017/18 old crop canola, these targets should be about 30 – 40 cents / bushel above the current local bid. If you want to do just 10%, I’m okay with that too. We’re looking to price this off the July 2018 contract.
For 2018/19 new crop, we’re suggesting that you put in a target that’s 20 – 25 cents / bushel higher for 10% of anticipated new crop production. This would move us to 40% sold. If you wanted to do 20% and move to 50% sold on the cash side, I’m okay with that too. We’re looking to price this off the November 2018 contract.
If you move to that 50% of new crop sold in the cash market, then I would start to consider some futures hedging at this level. This would involve using some put options to protect against lower prices but you should consult a professional futures broker for this service.
The key thing here, is if the targets don’t get hit, we’ll likely have a few more weeks for prices to track higher until the fact that there will be record canola acres in 2018/19 is realized by the market. After that, our best bet for higher canola prices will be North American weather premium, but with the recent dump of snow in Western Canada, soil moisture conditions are less of a concern than they were ago.
End all, be all, we’re positioning ourselves to capture the upside of the potential for increased volatility.
Happy to answer any additional questions you might have but we believe this to a smart, strategic play, considering where the potential for canola prices are likely heading in the next few months.
President / CEO
FarmLead – North America’s Grain Marketplace
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