Canola crush margins very strong

Canola crush margins remain historically strong, with domestic processors estimated to be making large profits given current market factors.

Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring in to the equation. As of Tuesday, the canola board crush margin calculated by ICE Futures Canada was $144 above the most active March contract.

Crushers “are always rolling their hedges as they crush it and then they put on new (hedges),” said a canola trader on how the processors were capitalizing on the strong margins.

Margins were not looking as favourable for next year’s crop, he noted, but were still strong at over $80 per tonne above the November 2014 futures.

The current margins represent an improvement of about $20 per tonne over the past month and about triple the margins being reported at this point a year ago.

Continued weakness in canola futures, brought on by record-large supplies, together with solid demand for vegetable oil, contributed to the high margins, according to a trader.

The weaker Canadian dollar, which dropped by nearly a cent relative to its U.S. counterpart on Tuesday, provided further support.

While crush margins may be strong, logistics issues in Western Canada have limited the actual crush pace.

The total crush in the 2013-14 crop year to date, as of Jan. 1, was reported at 2.8 million tonnes by the Canadian Oilseed Processors Association — about 200,000 tonnes behind the level seen at the same point the previous year.

– Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.