After rallying early in 2011, canola crush margins have declined as the Canadian dollar has soared past the US$1.05 level during the first third of the calendar year.
Ken Ball, a broker with Union Securities in Winnipeg, said the strength of Canada’s currency has a significant impact on canola crush margins.
“Every cent off the Canadian dollar is about C$6 off the crush (margin) in theory,” Ball said. “The margins have been pretty variable, but they have been fairly stable, with not a very large range. I would still call the margins ‘decent.'”
However, Ball cautioned the loonie could see some alterations, which could affect the direction of the market.
“The currency could also swing around a little bit,” he said. “The (Canadian) dollar looks unbeatable right now, but pendulums can swing with the currency pretty aggressively at times.”
On April 26, Statistics Canada reported there would be a total of 19.224 million acres of canola planted in Canada in 2011, which — if it happens — would be an all-time record.
Bill Craddock, a southern Manitoba-based trader, said the large expected crop is putting a bearish tone on crush margins.
“With the expected higher acreage in new crop, It’s putting pressure on the new crop (margins), which in turn is putting pressure on the nearby stuff as well,” he said.
Pretty much all crushing facilities are well covered with old-crop supplies, which has contributed to prices that have seen little direction of late, Ball said.
Although there have only been small adjustments to crush margins of late, he said there could be some volatility within a couple of weeks, depending on the weather.
“If May turns out to be a nasty month, it will be interesting,” he said. “We have to see some improvement (in planting conditions) by the middle of May, or else the tension will grow, and tense markets want to go up.”