Winnipeg Commodity Exchange New Crop Canola Price Outlook

During the past few months new crop canola futures prices have been trending upward. The Nov 02 canola futures have ranged from approximately $320.00/tonne at the beginning of May 2002 to a high of $362.30/tonne at the end of June 2002, a range of just over $40.00/tonne. A similar upward trend was observed last year at this time in new crop prices, however, to date the Nov 02 canola contract has continued to trade at levels above those observed a year ago in the Nov 01 contract.

While new crop canola futures prices have been trending up, the same trend has not been observed in new crop soybean futures prices. Nov 02 soybean futures prices have remained within a range of approximately Cdn$250.00/tonne to Cdn$275.00/tonne (adjusted for currency) during the past nine months. During this period Nov 02 Canola futures prices ranged from below $300.00/tonne to $360.00/tonne.

The upward trend in the Nov 02 canola futures has had an impact on the Canola Board Margin. The canola board margin values represent the futures price spread between the canola product values and the underlying canola seed values. The WCE canola meal futures values and the CBOT soybean oil futures values are weighted 60% and 40% respectively (adjusted for currency) and subtracted from the WCE canola futures.

Since early April when the Oct/Nov02 crush margin peaked at almost $10.00/tonne, it has generally declined, ending the month at -$7.50/tonne.

Statistics Canada's acreage survey results released on June 28, 2002, estimate almost 10 million acres of canola planted for 2002/03, up 5% from 2001. However, trade sources question this figure, with some private trade planting estimates as much as 20% lower. This uncertainty coupled with the ongoing crop condition and weather concerns may lead to significant price volatility in the coming months.