Wittal: Weigh canola downgrade against weather losses

Oct. 6 — Financial and energy markets took off out of the blocks like a sprinter this morning following positive overnight trading, but soon ran out of gas and faded back a bit as the day came to a close — sort of like the sprinter who forgot he was supposed to be running a long distance race, not a sprint.

Grains followed along out of concerns that a widespread hard frost is forecast this weekend throughout most of the northern and Midwestern states. The only thing holding markets in check is the U.S. Department of Agriculture’s upcoming production report on Friday, which could easily take the momentum out of the markets if the numbers come in as large as some in the industry think they will.

The U.S. dollar fell another three-10ths of a cent today.

The Canadian dollar rose 0.86 cents today, closing at US94.36 cents.

The Dow Jones December quote finished up 120 points, closing at 9,666 today.

Crude oil closed up 47 cents a barrel, at US$70.88.

Corn closed up 13-16.6 cents a bushel today, while beans closed up 22-25 cents a bushel.

Wheat futures closed up 13-17.4 cents a bushel today; Minneapolis December wheat closed up 15.4 cents a bushel for the day.

Canola closed up $2.30-$3.70 per tonne today.

October Western barley was up $1.40 per tonne, closing at $108 per tonne. November futures closed up as well at $151 per tonne.

Today we have a guest for you, whose work is reprinted with permission of the author, Steve Larocque of Beyond Agronomy at Three Hills, Alta.

Chlorophyll in canola

Many producers tried harvesting canola last week only to find high green kernel counts of four to six per cent, even after 14 days in the swath. As you might recall, many canola fields were swathed just prior to a week of hot dry winds with temperatures reaching the low 30s.

The combination of hot weather and low humidity levels brought moisture contents down to 4.5 to six per cent rapidly and stopped the enzymes’ ability to clear the chlorophyll properly.

It’s important to note that chlorophyll-clearing enzymes stop functioning at moisture contents of 20 per cent or less. If canola is swathed during hot, windy weather, which rapidly dries the immature seed to less than 20 per cent moisture, the green colour will not clear. Rainfall and rewetting in the swath can reactivate these enzymes but the results are often inconsistent.

As always, it pays to do your homework on pricing. If you do end up dropping to a No. 2 or No. 3 grade, be sure to call a number of grain companies like Louis Dreyfus, Viterra, Pioneer or Cargill before you make your decision to sell. Discounts for a No. 2 range from $10 a tonne at Viterra to $25 a tonne at Cargill. The discount from a No. 1 to a No. 3 at Viterra is $30 a tonne, where Cargill’s discount is $90 a tonne! That’s a difference of $15 to $30 a tonne between two companies.

Leaving canola in the swath can pay dividends 

Driving around the countryside, you can see a few canola fields yet to be harvested. The 34- to 57-cent per bushel discount for a No. 2 grade has producers risking the elements by leaving swaths in the field, hoping for precipitation to drop the green seed count below two per cent. During this process, moisture levels, which have been hovering around 5.5 per cent, may increase to nine or 10 per cent. If that occurs, producers will realize an increased bushel weight from higher seed moisture content.

Hmmm. I wonder how much weight and money we stand to gain by increasing moisture content in canola? Now, I know what you’re thinking, so step away from that garden hose.

Steve’s quick math: Let’s do some figuring here. Canola is 50 lbs. per bushel.

50 lbs. × 5.5 per cent moisture = 2.75 lbs. water

50 lbs. ×10 per cent moisture = 5 lbs. water

Net gain in weight going from 5.5 to 10 per cent moisture: 2.25 lbs. per bushel

A 30 bu./ac. canola crop × 2.25 lbs./water = 67.5 lbs./acre.

Net gain is 67.5 lbs./ac. ÷ 50 lbs./bu. = 1.35 bu./ac.

1.35 bu./ac. × $8.60/bu. = $11.61 per acre.

OK then: if you can wait out the weather and gain a few percentage points in moisture, you could be adding another $10-$12 an acre to the bottom line. If the green seed count doesn’t drop and you still end up with a No. 2 grade, then the $10 an acre loss you got from the drop in grade will be made up in the $11 gain in moisture. If you drop the green seed count and you don’t lose a grade, you’ve just yelled Bingo! and you can collect your $20 an acre prize at the elevator. Don’t drop your dobber. — S.L. *

Some things to keep in mind as you try to decide when to combine the last of the canola. Wind is becoming another factor that has caused losses in the field as swaths are being rolled around and pods shattered. Is it worth waiting for the green count to drop, versus losses from wind damage? A 10 per cent loss in a 30-bushel crop is three bushels at $8.50 a bushel, which equals a $25.50 per acre loss. Compared to a No. 2 discount of $15 per tonne average, you are better off to combine the crop, take the No. 2 and perhaps be able to do some blending to reduce your discount further.

That’s all for today. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

(* — Reference: Alberta Agriculture and Rural Development)

About the author

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Brian Wittal

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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