Prairie canola cash bids steady, yet uncertain

Western Canadian canola cash bids remain strong as the new year begins. The advances in canola futures values have helped boost cash prices as well.

However, uncertainty remains on how much further futures can rise before basis levels start to widen.

Currently, cash bids for canola range from $11.75 to $12 a bushel for old-crop, while new-crop cash prices range from $10.75 to $11.50 a bushel, said Mike Jubinville of Pro Farmer Canada in Winnipeg.

While crushers have typically given the best cash prices, Viterra is also offering some solid cash prices that are appealing to growers, he said.

Some of the strength in the cash levels recently has been from the rise in futures providing some underlying support, Jubinville said.

That support is coming from some tightness in supply of the global soybean market, he said, as hot dry weather in Brazil and Argentina recently raised the potential of  reductions in the South American crop.

Some recent positive sentiment towards the global macroeconomic picture has also been supportive toward futures, Jubinville said.

If higher-risk sentiment continues towards equities, energy and metals, that will spill over into the agricultural markets, adding to the firmness in futures and cash prices, he said.

Jubinville agrees current western Canadian canola cash prices are in line with futures contracts, but still wonders how long before basis levels will deteriorate.

If the March futures contract starts to fall around the $530-$540 per tonne level, cash basis levels could widen. However, despite the potential of basis levels widening, they are holding very well for now, he said.

CORRECTION, Feb. 2, 2012: Mike Jubinville, who was quoted in a previous version of this article as saying new-crop cash prices for canola range from $10.75 to $12.75 a bushel, actually said they were $10.75-$11.50. We regret the error.

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