Wittal: Canola basis levels show opportunity

July 24 –– Financial markets were steady to up slightly today. Trade was again very quiet, as traders may have taken a long lunch or are starting the weekend early.

The Canadian dollar continued its climb with a gain of 0.36 cents to close at US92.28 cents. This is up two cents over last week’s close.

The Dow Jones September quote closed up 57 points at 9,048 — up 243 points over last week.

Crude oil closed up 89 cents a barrel at US$68.05 — up $2.76 a bushel over last week.

Corn closed up 10-13 cents a bushel today, down seven cents a bushel from last week.

Beans ended down two to 18 cents a bushel today — down 12 cents a bushel from last week.

Wheat closed down seven to 16 cents a bushel on the various U.S. exchanges. Minneapolis September wheat futures closed down 8.4 cents a bushel today, down 22 cents a bushel from last week.

Canola closed down $6.50-$7.80 per tonne today, down $14 a tonne from last week.

Barley closed down $5.60 at $148.40 per tonne, down $6.60 per tonne from last week.

Yesterday, the Bank of Canada declared that Canada is out of the recession but that it is going to take until at least mid-next-year before our economy gets back to a more normal trend.

Attractive canola basis levels for new-crop delivery provide some real pricing opportunity for producers to lock in some nice premiums for the coming year. Current basis levels are $30 to $50 per tonne (about $1 per bushel) better than what we would traditionally see come harvest time. If you choose to lock in some basis only for new-crop, then you have at least locked in your costs with the grain company for them to handle your grain. Once harvest rolls around and you know what you have for tonnes, you can then start to price the futures against that basis contract.

Regardless of what the futures may do, you have at least locked in the basis, so you are not exposed to the probability of the basis widening out as harvest approaches. If you happen to be short of tonnes to fill your basis contracts and if the current basis is wider than what you locked in, you can transfer that contract to someone or surrender it back to the grain company at little or no charge. If the basis in the fall is narrower than your basis, you will have to do a buyback, which should be the difference between the two. Something worth considering.

That’s all for his week. — 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.

Brian 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.

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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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