Protect Your Canola Prices?Submitted by PI Financial Corp on October 18th, 2019
From July 2nd to July 25th November canola futures have traded in a tight range between $450/ton to $442/ton approximately.
I’m watching for a strong close above $450/ton to signal possible upside on the charts.
Other factors need to line up for canola to have any type of increase.
The Canadian Dollar is the first.
A drop below 76 cents would help support canola prices.
Currency traders are going to be watching what the U.S. Federal Reserve is going to do about interest rates next week.
On the soybean side positive developments from new face-to-face trade talks with China are wanted to be seen next week.
Recently, heat in Europe and a surge in palm oil this week and seen as short term positive forces.
The top end I could see canola getting to is around $460/ton.
I believe around this level producers should consider pricing some of their crop or protecting using options and futures.
One option strategy I like to use for clients is a ‘collar’.
This is where you buy a put option to protect you from a move down, but help pay for the strategy by selling a call to help reduce the cost.
If you are unfamiliar with options, see my Terminology page here.
My viewpoint is that $10/bu canola is going to be a good price this year given what is happening.