CNS Canada –– Prairie farmers are reluctant to sell into canola cash markets, in turn supporting basis levels recently as buyers have to work to entice farmer selling.
“I think farmers are patient; they are not selling this market when you see minor dips,” said Jerry Klassen, manager for Swiss-based GAP SA Grains and Products in Winnipeg. “In the first half of the crop year, there is not really a panic here to sell.”
Current Canadian canola cash prices range from about $8.90 to $9.70 per bushel, down $1/bu. or more from year-ago levels, according to Prairie Ag Hotwire.
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Many Prairie growers have also been holding back on selling as they wait for the new tax year, so there could be some more canola moving into the cash markets after Jan. 1, Klassen said.
Farmers have been selling when the target of $10/bu. is hit, which has been happening when the March ICE Futures Canada contract reaches $440 per tonne, depending on basis levels, he added.
However, even if the futures move above that level, and farmers start to sell more after Jan. 1, cash prices and basis levels aren’t likely to start tumbling.
“I think the basis levels are going to improve in the country,” Klassen said. “We’ve got adverse weather, we’ve got tight truck logistics, we’ve got relatively colder temperatures, and it all has to do with that.”
Stocks of canola aren’t expected to be overly burdensome at the end of 2014-15, which will likely keep a firm floor under the market as well.
With production pegged at 14.1 million tonnes by Statistics Canada, Agriculture and Agri-Food Canada is pegging 2014-15 ending stocks at 900,000 tonnes, well below the 2.36 million-tonne carryout seen in 2013-14. Anything below a million tonnes is said to be on the tight side for canola.
That production figure could increase in the next Statistics Canada production estimate, due out next Thursday (Dec. 4). The trade generally expects the figure to be higher than the previous 14.1 million-tonne guess, but not by a huge amount.
“I think the trade is pretty content with the crop size; it’s not like in past years where you have a big crop and it gets bigger,” Klassen said.
— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
