Crush margins for canola weakening

(Resource News International) — Crush margins for canola in Western Canada have been losing ground and it appears the downward trend is expected to continue in the foreseeable future.

“Based on the way I calculate margins, the crush for the spot month as of Friday was in the $84 per tonne range,” said Bill Craddock, an independent commodity trader and south-central Manitoba producer.

This was significantly lower than the $100 per tonne level about a month ago, and the lowest since the end of May when values were in the $81 range. On June 17, crush margins for processors in Western Canada were around $110 per tonne, basis the spot month.

The weakening of the profit margin for crushers was being associated with the fact that the price of the canola meal and canola oil was declining, Craddock said. Losses in U.S. soymeal and soyoil also have been working against the margins.

The pull-back in the value of the Canadian dollar, meanwhile, has been helping to slow the decline in crush margins, he said.

The easing of the crush margin for domestic processors, however, was not seen causing that sector to widen out basis levels offered to producers.

“What the domestic processors and elevator companies are offering for canola really depends on how bad the canola is needed and where the need is located,” Craddock said.

The spot price for canola at the Bunge processing plant at Altona, Man. had a $10 under basis value, while the Associated Proteins plant, recently purchased by Viterra and located at Ste. Agathe, Man., had a spot basis of $5 over. The two facilities are roughly 50 miles apart.

For September delivery, the basis at the Bunge facility was $18 under while the Associated Proteins plant was working with a basis of $8 under.

“That’s just an example of how things can be so different,” Craddock said, noting there were more such examples located right across Western Canada.

As of July 8, estimates from the Canadian Oilseed Processors Association (COPA) indicated that 3.786 million tonnes of canola had been crushed so far during the 2008-09 season. This compares with 3.757 million tonnes at the same time in the 2007-08 season.

Year-to-date crush capacity utilization for canola was pegged by COPA at 91.3 per cent, which would be down slightly from the 92.5 per cent level at the same time a year ago.

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