Marketing

Developing a Canola marketing plan? Consider the seasonal price patterns

According to the crop specialist, canola prices tend to level off into year-end, often improve during the December holiday period, trade sideways to lower into mid-February and then improve into spring.

“Prices tend to peak sometime in May-June and, unless production problems continue to support prices, usually eroded from mid-July into a harvest low. Often that price decline into harvest is interrupted by a frost concern in August or early September.’

When developing a marketing plan and analyzing a market, Blue points out, “Seasonal price patterns are just one factor. Fall delivered prices tend to be the highest at the beginning of the growing season when production uncertainty is the greatest, making it the best time to forward price some expected production, considering cash flow needs and available storage for the expected new crop.”

However, Blue notes out that in a year of reduced crop production in a major Northern hemisphere area, prices can rise during the growing season right into harvest.

‘Because of this possibility and that of an unexpected production shortfall on your farm, it is recommended to only forward contract with buyers up to about 50% of expected production. To price a higher percentage of canola prior to harvest, it is prudent to use the futures or options market to avoid additional physical delivery commitment.’

“Seasonal prices should be considered as more of a tendency than a certainty. ‘However, of the many factors that can affect crop prices, the seasonal price pattern is deserving of a crop marketer’s respect,” says Blue.

He explains that seasonal prices are calculated by taking the average price for a certain period, such as a week or month, and comparing it to the average price over a longer period such as a year. Seasonal prices are often plotted on a bar graph, with the annual price average as Index 100. Usually, such a calculation uses data from several years, thus reducing the influence of contra-seasonal price moves that happen in some years.

You can connect with Neil Blue, Monday through Friday, 8:15 am to 4:30 pm MST — Phone: 780-422-4053