The canola market - sell, replace or hold

Oct 05, 2021

With canola prices at historically high levels, there are several marketing alternatives to consider.

‘Other than sales commitments already in place, one question producers have is what to do with that remaining canola inventory,’ says Neil Blue, provincial crops market analyst with Alberta Agriculture and Forestry. ‘Should it be sold to take advantage of these record high harvest-time prices? Should it be sold and replaced on paper to track a potentially higher price? Should it be stored to await possibly even higher prices, while taking the precautions to ensure safe storage?’

An important first step in marketing is to know your product. Submit representative canola samples for grading to several buyers and the Canadian Grain Commission through its Harvest Sample Program. Blue notes that some buyers are paying premiums on oil content above a threshold level.

One consideration is the need for cash flow to pay outstanding and upcoming expenses. An alternative to selling canola for cash flow needs is to use the Advance Payments Program to borrow against crop inventory at a 0 or low interest rate.

‘Most basis levels, the difference between the cash and futures markets, are also seasonally attractive, particularly so after the harvest-selling period. These strong basis levels imply that, despite the high canola seed prices and weaker calculated crush margins, demand remains strong for the weather-reduced amount of canola produced. A basis contract will lock in that attractive basis component of price while enabling a target to be set on the futures price component.’

An alternative after pricing canola is to replace some or all of that volume with paper positions by buying deferred futures positions or by buying call options. The canola futures market is in an inverse position, where nearby futures prices are higher than deferred prices. That inverse position signals that the market demand is for canola seed sooner rather than later.

‘On the other hand, U.S. soybean oil and soymeal futures, which relate to canola prices, are in a flat or slight carrying charge situation where nearby futures are similar to or discounted to deferred futures. If one believes that canola demand and prices will remain strong throughout the crop year, with the futures market in an inverse, buying deferred futures or call option contracts to replace part of canola sold is a valid strategy,’ says Blue.

Storing the canola may also be a good decision. Most canola was harvested in dry condition, but one must pay attention to the condition of stored canola. Any spoilage of stored canola would be a shame with prices so high.

‘Again, basis levels are stronger for the deferred contracting periods and one may consider locking that basis while waiting for a higher futures price. However, with the futures market discounted for the deferred months, the futures market may need to improve from current levels to offset that inverse futures price.’

The bottom line, says Blue, is that there are several marketing alternatives to consider for canola. ‘Often, compromise is a good strategy, that is price some, store some, and possibly replace some on paper by using a brokerage account. Remember that nobody knows for sure what the market will do. Hopefully, the high price makes for an enjoyable and profitable marketing experience.’

Source : alberta

Video: The 15-Year Bet Behind Every New Variety!

Canada is trying to decide how much agricultural research capacity it can afford to lose. Brian Rossnagel believes the better question is whether the country can afford to rebuild it.

The longtime barley and oat breeder makes the case with a simple fact about his profession: the consequences of today’s decisions may not become visible for 10 or 15 years.

“Pick the right parents. That’s the biggest thing,” Rossnagel says. “If you pick the wrong parents, you’re not going to get anywhere—and you don’t know that until 10 years, 15 years later.”

That warning carries particular weight as Agriculture and Agri-Food Canada moves to reduce spending and streamline parts of its science operations. The department’s 2026–27 plan anticipates the loss of approximately 665 positions by 2028–29 and says some research will be reduced where capacity exists in academia or industry. AAFC says the changes will make its science operations more cost-effective over the long term.

For Canada’s seed industry, Rossnagel’s career illustrates what is at stake.

This fall, the retired University of Saskatchewan breeder will be inducted into the Canadian Agricultural Hall of Fame. During his 35-year career at the Crop Development Centre, he helped develop more than 100 barley and oat varieties, including CDC Austenson—one of Western Canada’s most widely grown feed barleys. His induction recognizes not only those varieties, but the collaboration and research system that made them possible.

Rossnagel is quick to emphasize that none of it was the work of one person.

“The first thing I thought about was all the other people who contributed to whatever success I and my program had over the years,” he says. “We know that it’s not an individual who does this. It’s a group—a team.”

That team extends well beyond the breeder whose name appears beside a variety. It includes technicians, pathologists, quality specialists, statisticians, regional testing sites, seed growers and industry partners. It also includes the breeders who came before and those who will carry the germplasm forward.

CDC Fraser barley, for example, moved through three breeding careers. Its parents came from Brian Harvey’s program. Rossnagel advanced the material after Harvey retired, and Aaron Beattie later guided it through registration and release.

That kind of handoff is normal in plant breeding. The person who makes the original cross may never see the resulting variety reach farmers.

It also explains why lost research capacity cannot simply be switched back on when budgets improve.

“If you shut it off, it’s very, very difficult—and particularly costly—to start it up again,” Rossnagel says. “If you have to start from scratch, it’s going to be at least 10 years before anybody notices whether you’re getting anything done or not.”

The concern is not simply how many experimental lines Canada can process. Modern equipment, statistical tools and genetic technologies allow today’s breeding programs to evaluate tens of thousands of lines—far more than Rossnagel could handle when he entered the field in the early 1970s.

But efficiency and automation do not generate every idea.

“If you pare back down, and instead of having six or seven individual scientists concentrating on wheat breeding, you go down and say three people could handle all this, well, that’s half the ideas gone,” he says. “Particularly if you happen to lose the three people who had the really neat and innovative ideas, boy, that’s a problem.”

It is a timely distinction for Canadian agriculture. Consolidating programs may preserve the volume of material moving through a system, at least initially. It may not preserve the diversity of thinking, regional knowledge or willingness to pursue unconventional crosses.

That regional knowledge matters because Canadian agriculture is not one uniform production environment. A variety suited to southern Alberta may face different disease, moisture and maturity pressures than one grown in Manitoba, Ontario or Atlantic Canada.

“Agriculture is applied biology,” Rossnagel says. “Biology, all around the Earth, moves from the poles to the equator. It does not move from Newfoundland to B.C. like politics do.”