Demand lifts old-crop canola, new crop lags

(Resource News International) — Old-crop canola bids continue to sit at price levels higher than new-crop, with demand being linked to this phenomenon.

“It’s all about the record pace of exports and the record level of canola being crushed by processors that are helping to keep old canola at a premium to new-crop at this time,” said Gord Mitchell of Mitchell Grain Co. at Spruce Grove, Alta., west of Edmonton.

The demand factor has resulted in cash bids for canola climbing well above $10 a bushel in most locations in Western Canada, with the price in some isolated areas starting to head toward $11/bu.

The fact that a lot of producers continue to concentrate on spring fieldwork and seeding rather than marketing has also worked in favour of old-crop canola bids, Mitchell said.

One cash dealer, who requested his name not be used, agreed demand was the main component keeping old-crop bids up in comparison to new-crop at the moment.

But the dealer felt it was only a matter of time before new-crop bids also begin to climb, especially if canola seeding delays in Western Canada continue.

“The possibility of a lot less canola supply being carried into the 2009-10 crop year also should help to boost new-crop prices in the very near future,” the dealer said.

He estimated canola exports will hit a record 7.5 million to eight million tonnes in 2008-09, while the domestic crush pace will also be a new record.

“You start doing the math and canola ending stocks for 2008-09 are going to be closer to, if not under, 1.5 million tonnes… this compares with earlier guesses of over 2.5 million,” the dealer said.

Mitchell noted that it was hard to know if the demand from China for Canadian canola will carry over into the new season and that was maybe why new-crop bids haven’t taken off higher quite yet.

The dealer felt new-crop bids will start to feel the effects of weather soon enough, and in turn will begin to push upward.

Cash bids for canola delivered to the elevator in Saskatchewan, according to Prairie Ag Hotwire data, currently range from $9.02 to $10.58 a bushel, in Manitoba from $9.75 to $10.26 and in Alberta from $10.36 to $10.70.

New-crop bids for canola delivered to the elevator in Saskatchewan currently range from $8.96 to $10.18 a bushel, in Manitoba from $9.79 to $10.16 and in Alberta from $9.79 to $10.16.

On May 7, canola delivered to the elevator in Saskatchewan ranged from $9.02 to $10.37 a bushel, in Manitoba from $9.20 to $10.07 and in Alberta from $10.03 to $10.50.

On May 7, new crop bids in Sskatchewan were $8.74 to $9.87
a bushel, in Manitoba from $9.60 to $9.84 and in Alberta from $9.80
to $9.92.

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