Canola basis levels are now at levels that aren’t particularly favourable to producers, but one analyst believes levels will narrow within the next couple of months.
Mike Jubinville, president of Pro Farmer Canada in Winnipeg, said commercial companies presently have a surplus of product, but will be looking to buy in a couple of months.
“By around May, end-users will be running low on canola supplies, and be in need of purchasing. This traditionally happens around that time of year,” Jubinville said.
Bill Craddock, a southern Manitoba farmer and trader, agreed basis levels will start to narrow before too long.
“The elevators are at around $30 per (tonne). They should come in a bit because the supplies will disappear eventually here and they will pay up to get them,” he said.
Jubinville said spot basis levels are at about $30 per tonne in Manitoba, $35 in Saskatchewan, and $50-$60 in Alberta. He expects to see those levels decline anywhere from $5 to $10 by July, depending on the area.
“The levels aren’t narrowing as the price is coming down,” Craddock said. “End-users are taking full advantage of it.”
Craddock said he is somewhat surprised at how large the sell-off has been in the futures market, but said he wouldn’t be surprised to values return to a bullish bias.
“I still think the market will go higher as well, but it’s going to take this global uncertainty to leave. That’s what has been killing the markets,” he said.