(Resource News International) — Canola cash basis bids have firmed sharply in the past week as the weather uncertainties for the crop have stimulated the move higher, said cash dealers and brokers.
Canola basis levels for old-crop deliveries have climbed to a premium of as much as $12 over the July contract in the Alberta area and are about even with the futures in much of the rest of Western Canada. “Farmers have just stopped delivering in the old crop as they worry about having a crop,” said a trader.
However, demand continues to be strong with over 500,000 tonnes of canola needed at ports by July 17, according to figures from the Canada Port Clearance Association. “The only movement (of canola) we are seeing is what has been contracted earlier,” a cash dealer said.
New-crop export demand is also reasonably strong for September through November positions, the cash dealer said.
New-crop basis for fall delivery has narrowed into zero with the November contract in Alberta and is only $3 to $5 per tonne under November in much of the rest of the country, cash dealers noted.
“The current dryness in Western Canada and it’s potential to wipe out as much as two million tonnes of canola have caused farmers to back away from selling,” a Winnipeg-based broker said. “This dryness is making any canola in the bin more valuable by the day,” he added.
Current weather forecasts call for only showers in the dry areas of central to eastern Alberta and western Saskatchewan, according to Environment Canada.
The chance of showers is no higher than 60 per cent over the next week and a solid rain is currently not in the forecast. The Canadian Wheat Board, at its crop production news conference on June 11, said rain would be needed by the second week of July at the latest.
Old-crop cash bids in Saskatchewan range from $9.75 to $10.37 per bushel, according to the latest issue of Prairie Ag Hotwire, while bids in Manitoba ranged from $10.01 to $10.25 per bushel. Alberta bids range from $9.83 to $ 10.50 per bushel.
New-crop cash bids in Saskatchewan are $9.39-$10.23 while in Manitoba they are $9.94-$10.06 and in Alberta they range from $9.55 to $10.21 per bushel.
Both old-crop and new-crop bids are down in the past week because of the weakness in ICE canola futures due to speculative liquidation and the general weakening in oilseed values, the broker said.
However, he quickly noted that the futures markets seems to have turned up now led by the firming tone in the cash basis.