(Resource News International) –– Cash bids for canola in Western Canada have been steadily declining given ongoing harvest operations and the prospects of a crop that may be much larger than first anticipated.
However, despite the drop in the cash price, basis levels for canola have been holding relatively stable, at least in some locations.
“The basis in certain locations on the Prairies has certainly weakened, but in others it has remained strong,” said Ken Ball, a broker with Union Securities Ltd. in Winnipeg.
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Ball said the ability of the basis to stay strong at some locations reflects the need to attract deliveries due to an active export program.
“There are indications that China was fairly active in picking up Canadian canola, and now that China has slowed its purchases of U.S. soybeans, there may be room for some additional cargoes of Canadian canola,” he said. “A few of these companies have been doing the bookings and they are the ones keeping the basis stable.”
Steady demand from domestic processors was also helping to keep the basis firm in some locations, Ball said.
The best basis values continued to be offered in Alberta, with the basis widening out the further east one goes, he noted.
Not much longer
The basis levels, while stable in some locations, were not expected to hold much longer, as the steady movement of canola off the combines was starting to fill elevator space at a fairly rapid pace.
“A lot of that has to do with the fact that yields for canola were coming in well above expectations in a lot of regions,” Ball said.
As an example of some of the strong basis opportunities available, Louis Dreyfus Canada, which operates inland terminals across Western Canada, posts prices on its website showing spot basis levels as high as $7.05 per tonne over the November futures in southern Alberta.
Moving eastward, the Calgary-based company’s widest basis levels are found in southern Manitoba, where its terminals are now offering basis levels in the $19-$25 per tonne area under the futures price.
Cash bids for canola, delivered to the elevator, as per Prairie Ag Hotwire data, in Saskatchewan currently range from $7.89 to $8.52 a bushel, in Manitoba from $8.02 to $8.32 and in Alberta from $8.04 to $8.72 a bushel.
At the beginning of September, cash bids for canola in Saskatchewan, based on Prairie Ag Hotwire figures, ranged from $8.94 to $9.56 a bushel, in Manitoba from $8.74 to $9.52 and in Alberta from $9.29 to $9.86 a bushel.
