Canola crush margins lower, but still strong

(Commodity News Service Canada) — Demand for canola from domestic crushers has been very strong, which has helped push canola values near the $600 per tonne level. However, the crush margin has been declining of late.

Bill Craddock, a Winnipeg-based trader who also farms in southern Manitoba, said the fact that canola is not following soybeans lower is the primary factor for the margins declining.

“Canola is strong, beans are fairly strong as well, but when beans show weakness, canola doesn’t necessarily come down the same way,” Craddock said.

The current canola crush margin is $88.09 per tonne above the March futures, according to ICE Futures Canada. That price is about $15 per tonne lower than two weeks ago, but is about $5 per tonne higher than one month ago.

The current prices are still quite favourable for crushers, Craddock said.

“At $85 to $100 per tonne, they are fantastic,” he said. “They’re (crushers) not hurting their bottom line by crushing. I think even if those margins were $50 lower, they’d still be doing OK.”

“I think it’s reflecting that we have a lot more crush capacity and they are using it, and they are finding a market for their product,” said Chris Beckman, an oilseed analyst with Agriculture and Agri-Food Canada in Winnipeg.

“Someone once said ‘It doesn’t matter what the margin is if they can’t sell their product.’ The fact that the margins are strong is a sign things are going well.”

The strong Canadian dollar, trading nearly one full cent above parity with its U.S. counterpart, would usually be providing more of a bearish impact on the crush margins. However, that’s not the case at the moment.

“The Canadian dollar hurts it, but when soyoil is as strong as it has been, it pretty much offsets it completely,” Craddock said. “(Soy) oil is US57 cents per pound, and that is phenomenal. But that’s also tied to crude oil which is right around the US$90 per barrel area.”

Beckman also said the market for soyoil has been quite strong lately, but added he wasn’t sure if it was a trend, or if the price would keep going back and forth.

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