CNS Canada — Canola crush margins continue to widen to unprecedentedly large levels, highlighting the cheapness of canola seed compared to its worth when processed.
Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring in to the equation.
As of Thursday, the canola board crush margin calculated by ICE Futures Canada was about $175 above the most active March contract.
The current margins represent an improvement of about $20 per tonne over the past month and come in at nearly triple the levels seen at this time last year. New-crop crush margins are also over $100 per tonne above the November futures, which is historically strong as well.
Canada’s record-large crop and logistics issues hampering movement across the Prairies continue to weigh on canola prices, both in the futures and in the cash market where basis levels remain wide.
At the same time, the Canadian dollar has weakened sharply over the past month, losing four cents relative to its U.S. counterpart. Those two factors are playing the biggest role in the wide crush margins, according to market participants.
While crush margins may be strong, logistics issues in Western Canada slowing grain movement are also limiting the actual crush pace.
The total crush in the 2013-14 crop year to date, as of Jan. 15, was reported at just under 3.1 million tonnes by the Canadian Oilseed Processors Association, over 200,000 tonnes behind the level seen at the same point the previous year.
– Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.