Canada Markets

Huge Prairie supplies and a challenged logistical network have contributed towards widening basis levels on the Prairies as line companies seek to discourage nearby deliveries.

As seen on the attached chart, the nearby average Prairies cash basis for canola has widened to $46.12 per metric tonne ($1.05/bushel) under the January future, as seen by the red bar on the left while the nearby 1 CWRS basis is calculated at $1.75/bushel ($64.30/mt) under the March future, as indicated by the black line with markers and measured in dollars per bushel under the MGEX March future on the right vertical axis.

So what market signals are being shown further out? Perhaps the most aggressive basis levels could be expected in May, which is a difficult month of the year to attract deliveries as producers focus on seeding, although the canola basis shows very little improvement in May 2014, with the average basis calculated at $45 under, only $1.56/mt improvement as compared to the spot basis, while the Jan/May futures spread is $19.70/mt for a $21.26/mt gain for contracting into this time period.

CWRS basis levels do narrow into May, with the average May basis calculated at $1.39/bu. under the May future. The March/May spread is 11 cents/bu. (May trading over the March), while basis appreciation in this time frame results in a 36-cent gain for a total gain for contracting into May of 47 cents per bushel or $17.27/mt.

Beyond May, both canola and spring wheat basis levels continue to widen as growing carryout stocks are eventually combined with new crop production. The average canola basis calculated for September is even wider than current levels at $56.71/mt under the November future, while the average CWRS basis is calculated at $1.58/bu. under the December future.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

(ES)

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