Are canola prices juicy enough in 2022-23?

Are canola prices juicy enough in 2022-23?

Canola prices for 2022-23 have risen 16% in the EU futures markets since Russia’s war on Ukraine began, however, the issue for Australian growers is how to take advantage of the international price lift

Canola prices for 2022-23 have risen 16% in the EU futures markets since Russia’s war on Ukraine began, however, the issue for Australian growers is how to take advantage of the international price lift

For 2021/22 some growers were caught out by their hedging strategy of selling Paris MATIF Canola futures contracts at what appeared to be lucrative prices at the time, and of course, they were.

For 2021/22 some growers were caught out by their hedging strategy of selling Paris MATIF Canola futures contracts at what appeared to be lucrative prices at the time, and of course, they were.

However, when MATIF prices rose substantially, local Australian prices did not shift in tandem, and the Australian Canola’s basis discount blew out to deep discounts. As a result, losses were incurred on the international futures short positions which were sold, which were not counterbalanced by similar sized price gains on the physical production positions held within Australia

However, when MATIF prices rose substantially, local Australian prices did not shift in tandem, and the Australian Canola’s basis discount blew out to deep discounts. As a result, losses were incurred on the international futures short positions which were sold, which were not counterbalanced by similar sized price gains on the physical production positions held within Australia

So what alternatives are there other than utilising MATIF and ICE futures contracts to manage canola price risk? Two key products to consider are futures options, and physical forwards.

So what alternatives are there other than utilising MATIF and ICE futures contracts to manage canola price risk? Two key products to consider are futures options, and physical forwards.

When figuring out what proportion of your harvest could safely be committed to forward selling take into account planned planting acreage, current moisture profiles, the necessary additional rainfall during the season to generate an average yield, and the possibility of rare “black swan” events relevant to your property like floods, fires, and extreme weather that could spell disaster

When figuring out what proportion of your harvest could safely be committed to forward selling take into account planned planting acreage, current moisture profiles, the necessary additional rainfall during the season to generate an average yield, and the possibility of rare “black swan” events relevant to your property like floods, fires, and extreme weather that could spell disaster

Some producers sell forward just enough volume such that their expected gross revenue will cover input costs for the season, leaving the remaining volume exposed to market prices at harvest as the cream on top. Obtaining trusted agronomic advice, and buying quality seed with traits best suited to your conditions is one way of reducing production risks.

Some producers sell forward just enough volume such that their expected gross revenue will cover input costs for the season, leaving the remaining volume exposed to market prices at harvest as the cream on top. Obtaining trusted agronomic advice, and buying quality seed with traits best suited to your conditions is one way of reducing production risks.