Better cash prices expected for canola, post-harvest

(Photo courtesy Canola Council of Canada)

CNS Canada –– Farmers in Western Canada have seen weaker prices on the cash market for canola recently, due to a tumbling futures market and an influx in supply as harvest progresses.

Some panic-related farmer selling off the combine, as futures continue to drop, was also contributing to the weakness.

But prices should start to increase after harvest, as basis levels are expected to improve, said Errol Anderson of ProMarket Communications in Calgary.

“I think once canola is in firm hands after post-harvest, who knows where this basis is going?” Anderson said. “I’m quite bullish the basis.”

Current basis levels and cash prices are very variable across Western Canada, with spot bids ranging from $7.90 to $9 per bushel as of Thursday, according to Prairie Ag Hotwire.

Some buyers aren’t bidding aggressively on what little new-crop canola is available now because there’s still a lot of old-crop canola sitting in storage, said Ken Ball of PI Financial in Winnipeg.

But they could start to bid more strongly for old crop going forward, due to quality issues with the new crop.

“Commercials are going to be eager to get their hands on old-crop canola because it is better quality and they don’t have to worry about the green content in it,” Ball said.

The best basis levels and cash prices probably won’t come until spring, due to concerns that canola supplies could be tighter this year, Anderson said.

“I think we’re going to go quite a bit over the futures in a lot of locations,” he added.

But it will all depend on how big the 2014-15 canola crop ends up being, Ball said, adding that the Oct. 3 Statistics Canada won’t likely give the best production estimate for the year.

“We’ll find out maybe a slightly better estimate of the crop but it still won’t be the final estimate because when they gathered the data almost no canola had been combined,” Ball said.

The trade will have to wait until the December StatsCan production report to get the final number, or for more field estimates.

“If the canola crop is only 14 million tonnes, we’re going to run out of canola. We’re just going to flat run out,” Ball said. “If it’s 15 million tonnes, we’ll probably be OK.”

Statistics Canada pegged 2014-15 canola production at 13.9 million tonnes in its August production report. [Related story]

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.



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