Canola cash falling, basis holding firm

(Resource News International) — Canola cash prices have been falling as the futures market has tumbled back to its lowest levels since March, but the basis levels have remained relatively firm, say cash dealers.

“We’re kind of worried that farmers are going to lock the bins again, now that most areas have dropped below $10 a bushel,” said a cash trader. “That’s one of the reasons that the basis is so firm.”

Cash dealers have noted that farmers are very reluctant sellers below $10/bu. “Even before the drought problems developed, you couldn’t get a bushel out of farmers’ hands below $10/bu.”

However, if the rains that have appeared in the dry areas of Alberta and Saskatchewan continue and the crop conditions start to look good, basis is likely to fall as farmers lock in new-crop prices and buyers back away from the market, on ideas they will have no trouble getting supplies at harvest time, said Brian Wittal of Alberta’s Pro Com Marketing.

Currently, Alberta basis levels, which tends to be the best on the Prairies, continue to be at a premium to futures with Crossfield, Alta. seeing a basis of $9.91/bu. over futures, said Wittal. That would yield a price of just under $10/bu., he added.

Generally, cash basis in Alberta is ranging $5 to $10 premium to futures right out to the March delivery period.

Traders note that exporters do have an export program in place for the September-through-December time frame. “It’s not a huge program, but there are bookings and China is in for 2009 canola,” said an export source. “They (China) were looking last week.”

Crushers continue to be fairly aggressive buyers, but bids have weakened as crush margins have declined, said Ken Ball of Union Securities in Winnipeg.

While down from their highs, crush margins are still reasonable and that is encouraging strong basis levels, he said.

Currently, cash bids in Manitoba range from $9.71 to $10.08/bu. for the old crop while the new crop ranges from $9.40 to $9.53/bu., according to Prairie Ag Hotwire.

In Saskatchewan the old-crop bids range from $9.29 to $10.07/bu. with the new-crop bids at $9.24 to $10.05/bu. Old-crop bids in Alberta range from $9.71 to $10.11/bu. with the new crop at $9.48-$9.98/bu. These are all down significantly in the last week and are about $4/bu. below the highest prices of the year.

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