Scarcity is an essential topic in the financial economics of commodity markets. Due to the peculiar nature of severe weather events processing capacity and food supply offset each other but in net terms do not perfectly match. These imbalances will be mirrored into prices and the trader’s role is to make a market by facilitating the supply and demand while offsetting risks for the end-users and farmers.

“Merchants/Crushers are shorts and oversold and they will keep bidding the seeds to make back their plants fixed costs with the tailwind of a strong vegoil export demand. Anything that the farmers are willing to sell, they will buy to cover the past, prompt and forward book. In addition to the weather and the low stock-to-use picture, the extreme-volatility regime in crush margin absorbs the market risk for the farmers. We opine that it has been the story and along with it a November CANOLA new crop rising.” Continue reading →