(Resource News International) — Cash bids for canola in Western Canada have taken an abrupt downturn, with elevator companies widening out basis levels in order to deter producers from delivering.
“Basis levels for canola by elevator companies really comes down to how badly they want the commodity,” said Gord Mitchell of Mitchell Grain Co. at Spruce Grove, Alta.
“In some locations on the Canadian Prairies the basis is as little as $5 under, in some places it’s averaging $25 under and for the companies that absolutely are trying to discourage deliveries, it’s as wide as $40 under.”
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Cash bids in general, however, have been trending down given the declines experienced by the CBOT (Chicago Board of Trade) soybean complex over the past week or so, according to Glenn Lennox, an oilseed analyst with Agriculture and Agri-Food Canada.
Lennox also pointed out that the basis for canola has been running higher than normal all fall at a number of locations, which can be attributed to the strong deliveries of tough and damp canola by producers.
“Producers who have quantities of tough and damp canola on-farm have been trying to move this product as quick as possible,” Lennox said. “Previously producers may have held onto some of it into the new year to get a better price, but with the extremely high moisture content a factor, they just couldn’t afford to wait.”
Elevators just have not had to put up much in the way of incentives to get the producers to deliver, he said. In fact, some of the elevators, depending on the location, are full, and that’s why the basis is so wide out in some locations.
Lock and wait
Mitchell pointed out that with cash bids below $8 a bushel in some locations, producers are going to lock up those bins and wait until values become more attractive.
However, he also acknowledged there’s a lot of canola available in view of the large production of the crop, and that will continue to weigh on bids.
“Until farmers slam the door on their bins and keep the locks on, there will be little incentive for the elevators to improve the basis and raise the cash price,” Mitchell said.
“At some point they will need the canola, but right now that is just not the case.”
Cash bids for old-crop canola, delivered to the elevator, as per Prairie Ag Hotwire data, in Saskatchewan currently ranges from $7.82 to $8.36 a bushel, in Manitoba from $7.95 to $8.24 and in Alberta from $7.82 to $8.70.
New-crop cash bids for canola in Saskatchewan currently range from $8.44 to $8.75 a bushel, in Manitoba from $8.75 to $8.87 and in Alberta from $8.80 to $8.92.
On Jan. 4, old-crop cash bids for canola in Saskatchewan, as per Prairie Ag Hotwire data, ranged from $8.40 to $9.04 a bushel, in Manitoba from $8.57 to $8.76 and in Alberta from $8.36 to $9.19.
New-crop cash bids on Jan. 4 for canola in Saskatchewan were $9.05 to $9.26, in Manitoba from $9.17 to $9.30, and in Alberta from $9.26 to $9.30.
