CNS Canada — Canadian canola crush margins are finally starting to ease into more traditional levels, after hitting their highest prices ever over the winter months.
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 Monday, the canola board crush margin calculated by ICE Futures Canada was about C$167 above the most active July contract, having lost about $25 over the past month.
Crush margins relative to the nearby futures had moved as high as $235 per tonne in February, when logistics issues hampering rail movement across the Prairies caused the spread between canola seed and the product values to widen out considerably.
“It looks like the crush margins just got too good,” said a Winnipeg-based canola trader. With transportation starting to open up across the Prairies, he said end-users were now looking to buy once again. As a result, most of the reduction in margins was tied to increases in the price for canola seed.
At this time a year ago, the margins only worked out to about $25 above the July futures. While a return to that level is not likely any time soon, there is still a very large cushion for the crushers to work with which should leave the door open for further price increases to the farmer (and resulting decreases in crush margins), according to traders.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.