Wittal: Canola basis levels increasingly attractive

Our online grain markets columnist Brian Wittal welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

May 22 — Financial markets were mixed today with no real economic news to help or hinder any further advance in the futures. The Canadian dollar continues to climb, looking to break the 90-cent mark sooner than later.

Beans finished down on the nearby months but up on the forward new-crop futures. Continued strong export sales and further reductions in world inventories and new-crop production are keeping beans on a steady upward course. The slumping U.S. dollar is helping with export sales.

The Dow Jones June quote closed down 33 points today at 8,262 and that’s down five points overall from last week’s close.

The Canadian dollar was up 1.57 cents today to close at US89.29 cents. This has been a 4.25-cent rally this past week.

Crude oil finished up 62 cents, closing at US$61.67 per barrel for the day, up $3.67 per barrel over last week.

Corn finished up four to seven cents a bushel today, and up 13 cents a bushel for the week. Beans finished up 11 to down nine cents a bushel today and ended up 33 cents for the week on the nearby July futures.

Wheat finished up 13-19 cents a bushel on the various U.S. exchanges today. Minneapolis July wheat futures finished up 33 cents a bushel for the week.

Canola finished down $1-$7 per tonne for the day and ended the week down $5.70 per tonne.

Barley finished down 20 cents per tonne to close at $154.80 per tonne. This is up $2 per tonne for the week.

Canola is seeing the effects of the soaring Canadian dollar as futures values fall from the previous week, while bean values continue to push upward week over week. We may see a continued erosion of canola futures as seeding comes to a close over the next week or two.

Canola basis levels across the Prairies continue to tighten as an incentive to deliver old-crop or to contract some new-crop. Currently there are very attractive basis levels out for January 2010 delivery to Viterra facilities. At Crossfield, Alta., the January basis is -$1.09 per tonne.

At Davidson, Sask., the January basis is -$19.30 per tonne and at Winkler, Man., it’s -$22.23 per tonne.

Non-commercial U.S. traders (speculators) continue to add to their long positions with the belief that these markets still have room to run. Current weather concerns around the world will supposedly help to draw down world grain inventories, which is helping to support grain futures at this time, but the growing season ahead can change that real fast.

There are calls for heavy rains later this weekend in large parts of Argentina where they are under severe drought conditions. If this materializes, it could mean farmers might try to plant a second crop of wheat, which until now they were reluctant to do.

This could be a swing point for wheat futures going forward.

Have a great weekend. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as grain producers.

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Brian Wittal

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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