According to pdqinfo.ca's July 16 report, the average canola bid in southwestern Saskatchewan was $419.44/metric ton or $9.52/bushel delivered to a primary elevator. This is down from $455.73/mt on the same date in 2018 and the three-year average of $457.73/mt.
As is seen on the attached chart, the new-crop basis has narrowed in recent weeks, reported at $25.86/mt under the November contract on July 16 after reaching its weakest point over this period of $36.85/mt under on April 18 (brown line). At this time, the 2019 basis was in-line with that offered for the same day in 2018.
While basis has improved by $10.99/mt over this period, it was easily offset by a loss of $27.20/mt from the April 18 high to the July 16 close for the November future. Concerns surrounding the prairie crop's potential may be seen easing with recent rains. Meanwhile, prospects of a growing carry-out, a lack of supportive news in terms of trade with China and Canadian dollar strength act as bearish features in this market.
Producers may choose to get their feet wet marketing 2019 crop (and 2018 carry-over) at $10/bu. or $440.92/mt, suggesting that basis may continue to face pressure.
This trend bears watching and may provide an opportunity to contract a favorable basis while looking for futures to potentially react higher, given 1) the uncertainty surrounding planted acres of soybeans in both the U.S. and Canada, 2) the production potential for the North American soybean crop given late planting and 3) the potential for trade with China to be partially resolved either in soybeans or canola.
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