The rally in Canadian canola futures coupled with another slip in the $A has thrown up some attractive hedging opportunities.

We spoke to Mike at ProFarmer Canada for his view on the situation.

‘No secrets here... A progressive series of rain events over the past 2-3 weeks through central and eastern Saskatchewan and all of Manitoba has stalled seeding efforts as crop insurance deadlines loom.

The situation has worsened and has become dire through a significant portion of the eastern Prairie region.

It seems a certainty now that more than 5 million acres will go unseeded in Saskatchewan.

Add to that more minor lost acres in more advanced Manitoba, plus flooded fields causing any number of emergence issues and diminished yield/quality potential...and it is hard to spin these field circumstances as anything but troubling.

‘But on the western half of the Prairies, conditions are looking considerably better...and that’s easy to forget when the talk is focused on the anxious east side of Western Canada.

‘We quite likely have the largest prevent seeded acreage total in my memory. It would seem that Canadian canola production expectations have been knocked back by 2mmt from earlier expectations... perhaps now at 11mmt as an early target.’

ProFarmer Australia here: Although there is the potential for canola to rise independently of movements across the total oilseed complex, price upside will be limited by the strong potential of the US soybean crop.

Local growers without too much production risk, should be scale up hedging on the current rally. Our preferred hedging instrument are ICE canola swaps which leave local basis floating.

China & US corn

Apart from the Canadian canola story, the other big unknown impacting grains markets relates to Chinese imports of US corn.

Last week, the first shipment of US corn departed the Pacific North-West bound for China. The vessel will arrive next week.

The attitude of Chinese authorities to these shipments could shape the path for coarse grain prices over the medium-term.

China has strict GMO import protocols and if it decides to enforce them, it could lead to a rejection of these imports (which have been organised by private traders). Alternatively, if authorities take a relaxed stance it could promote significant trade in corn between the US/China - similar to what has happened in soybeans.

Currently the price of corn in China is about double the world price. Chinese Government authorities have some policy dilemmas to work through. Do they allow imports and depress farm incomes; or reject imports and prevent access to cheaper forms of protein for its growing population.

Eventually the Chinese Government will decide that it is more important to provide its population with cheap protein.

So it is a matter of when, not if, they will allow corn imports. When it eventually does, you can bet it will have widespread implications for global agriculture.

Just look at the impact of Chinese soybean imports on the global oilseed industry (the size of this industry has virtually doubled in the past decade).