Wittal: Never seen canola premiums this high

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.

March 6 — The stock markets were down again, with the Dow off 100 points. The U.S. dollar fell a quarter of a cent today, which helped U.S. grain futures hold onto gains today.

The Canadian dollar finished up slightly today to close at US77.60 cents. This pushed canola futures down to close even or with minor losses for the today.

Crude oil was up $1.91 to close at US$45.52 per barrel, which helped to keep beans and canola trading positive for most of the day. The currencies were the big factor in why beans finished up and canola flat to down on the day.

Corn was up three to four cents a bushel, beans were up 14 to 17 cents a bushel and wheat was up 10 to 14 cents a bushel.

Canola was up 20 cents to down 40 cents per tonne, and barley finished up $1.50 per tonne for the day.

The premiums that grain companies are offering for canola deliveries right now are higher than I have seen them in my 27 years in the industry.

I can’t recall a time when canola basis levels of +$20 per tonne were offered in the Calgary area for this long a period of time in an effort to get producers to sell some tonnes.

Producers are stubbornly holding off selling and this may force the companies to crank up the premiums a little more, but at some point in time, selling will happen and premiums will disappear. Don’t wait too long! New-crop November basis levels are also fairly tight right now, which is also something to consider.

Reuters reports that the Russian state-owned bank is in the process of handing out 120 billion roubles (US$3.3 billion) in loans to farmers hit hard by the current crisis, in an effort to get them to produce another bumper crop of grain this coming year.

Russia gathered 108 million tonnes of grain in 2008 which is its biggest crop since 1990 and hopes to surpass that volume this coming year.

If Russia produces another bumper crop you can be assured that a good portion of that grain will be on the export market next year — and with them being known to sell large volumes at low prices, it would not be very supportive to world grain values next year.

We are going to continue to see some very interesting developments around the world as governments try to come up with ways to bolster their ailing economies and provide jobs and food for the masses. Don’t be surprised if we see more outright subsidy payments to farmers in parts of the world in an effort to encourage production in order to just feed the population.

There are a lot of hungry people in the world and they can’t afford to buy grains at current world prices so governments will need to supply it or face the possible consequences of a hunger revolution.

That’s all for his week. Off to the Brier we go! — 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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