Slow deliveries keep canola cash market firm

(RNI) — Cash prices for canola in Western Canada continue to firm as slow farmer sales and commercial demand underpin the market.

As of June 11, canola prices (delivered to elevator) ranged from a low of $9.75 a bushel to a high of $10.95 a bushel, according to prices collected by Prairie Ag Hotwire.

Those values are 10 to 37 cents a bushel higher than week-ago levels.

Old-crop basis levels are attractive because there is still a good export program for canola and grain companies are trying to tempt supplies into the commercial pipeline, said Jerry Klassen, an independent analyst.

As for new-crop canola, basis levels are good because of the lateness of the 2009-10 canola crop in Western Canada.

“There is a strong export program projected for September and October but with the later crop, it’s going to be a struggle to meet some of these export requirements. That’s why we’ve seen very strong basis levels for new crop as well,” Klassen said.

However, farmer selling has slowed because of concerns about their 2009-10 canola crop.

“They’re holding back on sales and so far, in this bullish environment, it seems like they’re being rewarded for waiting,” Klassen said.

“Here and there”

Growers are likely to sell bits and pieces as the market edges higher and basis levels firm but it is difficult to say whether any one price level would trigger a wave of deliveries because so many psychologically-significant price targets have been surpassed, he said.

Concerns about new crop production are only part of the reason farmer sales have been slow, said Tracy Glessing, grain buyer for North East Terminal at Wadena, Sask., about 100 km east of Humboldt.

“Guys are making small sales for the fall here and there and they’re keeping some supplies in the bin so they have something to move if their crop doesn’t work out,” he agreed.

Another reason, though, is that growers have been watching prices move higher lately and they’re wondering if they can get better prices by holding out a while, Glessing said.

“Optimism is still playing a part in this. Some growers still have $15 a bushel canola left in their heads from last year,” he said.

Finally, there may not be a lot of canola left to sell.

“I estimate that, at least in our area, there is only about a quarter of production left on farms. Sure, some guys have a lot left and the next guy has none, but overall, I would say only about a quarter is left,” Glessing said.

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