The canola waiting game

WA's canola harvest is gathering pace, but with prices near a five-year low, many growers are reluctant to sell at current levels.

Instead, many are storing their crops on farm or warehousing with CBH.

Profarmer Australia commodity analyst Hannah Janson said canola had been a weak performer for many months, trading at $470 FIS Kwinana zone because of a massive global crop of canola and soybeans.

"The Canadian canola crop is expected to be the third largest on record, and there is also a lot of stock left over from the previous season," she said.

"We've also had a record rapeseed crop in the European Union, so the expectation is that the Australian canola crop will have pretty strong competition into our traditional markets."

Dandaragan farmer Jeremy Roberts plans to sit tight on his canola until the price, hopefully, improves.

Mr Roberts said he forward sold about 10 per cent of his canola crop earlier in the year, locking in higher prices.

But with canola currently being harvested, he plans to warehouse at CBH in the hope there is a price improvement.

"I'm not going to panic sell," he said.

"We have used last year's lupin surplus and prime lambs for our cash flow and at present there are better pricing opportunities with wheat and barley."

Mr Roberts, who farms with wife Sarah, parents Wade and Sally and brother Zac and his wife Jane across three farms at Badgingarra and Dandaragan, this year planted 750ha canola, 800ha wheat, 400ha of barley and 500ha of lupins.

The canola cropping program represents a 30 per cent increase on previous years, in order to open up more pasture paddocks and the fact canola has a wider range of in-crop herbicides.

Canola varieties this year include the triazine-tolerant Benito, Crusher, Snapper and Stingray varieties. Mr Roberts is about a third of the way through harvest and is averaging 1.8t hectare yields.

He said the weaker prices highlighted the ongoing need for research and development aimed at developing higher-yielding varieties.

"The ability to get just 500kg more per hectare would make a huge difference to returns," he said.

But Mr Roberts said the low prices needed to be put into perspective.

"When I came back onto the farm in 2009 the canola price was $440 a tonne so at current levels of $470 it seems okay, but still there's not much cream in it" he said.

"But I'd be very worried if it went any further south."

Mr Roberts considers himself fortunate having avoided the heavy rains at the weekend, particularly considering neighbours just 15km away had more than 30mm of rain and hail damage.

Tammin farmer Brad Jones finished harvesting his canola crop this week. While 60 per cent of the crop was forward sold before the start of harvest, locking in a higher price, he was in no hurry to sell the remainder.

"At the moment we have this in the CBH system and will make decision as to whether to sell in a few weeks, when we have made a closer assessment and considered all the variables," he said.

Mr Jones, who farms with wife Kate, also considers himself fortunate to avoid the hail storms. Although he did receive about 22mm of rain he said it was too early to assess whether this had damaged his crops.

Ms Janson did not believe the reluctance of farmers to sell at current pricing levels would create problems.

"The reality is if the trade needs to buy they will increase the price," she said.

"Because we've had the European and Black Sea crops come off around August, and the Canadian harvest is just wrapping up now, internationally most attention has been in the areas where the crops are available.

"So as harvest gathers pace we are at the point where the focus may shift back to the Aussie crops and the trade may start to engage with Australian growers.

"It's always better to be selling into appetite."

But Aus-oils managing director Jon Slee believes the canola price could fall even lower.

"Over recent years the world crude oil market had been acting as a floor to world vegetable oil markets, which in turn was helping to stop further downside to canola prices," he said.

"The crude oil price has fallen by about $20 a barrel in the last few weeks which has meant a shift in this floor, which could lead to further downside in world vegetable oil prices, and in turn canola."

Offering some relief to the price, however, is the weaker Australian dollar. According to Ms Janson, each one-cent move in the Australian dollar equates to about $4 tonne for canola at current prices.

Mr Slee said he the only real upside potential before WA's canola harvest was in full swing would be if the crude oil price rallied significantly or there were further falls in the Australian dollar.

CBH general manager of marketing and trading Jason Craig said lower canola values might result in a higher percentage of growers delaying their nominations.

"While this is entirely the decision of the grower, it is fair to say traditional canola is a crop that is shipped predominantly in the first half of the calendar year so growers holding canola into the second half of the calendar year should be aware that they may experience limited buyers in the market," Mr Craig said.

The Grains Industry Association of WA is forecasting a 1.766 million tonne State canola harvest.