Canada Markets

Canola Market Shows Signs of Commercial Activity

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The average prairie canola basis has narrowed, given recent market weakness, with the cash basis calculated at $17.50/mt under the March future. Basis through the month of May has also narrowed, showing keen interest through the next few months. (DTN graphic by Scott R Kemper)

The average prairie canola basis, based on available internet bids, narrowed almost $2/metric ton in the past two trading days to $17.50/mt under the March, after trading as wide as $33.84/mt under the nearby future on Dec. 17. This is the narrowest average cash basis calculated this crop year, perhaps designed to keep the average bid above the $10/bushel target often sought by producers. Based on today's close, the average prairie bid is $10.10/bu.

Spreads have also narrowed this week, a positive sign of supportive commercial buying interest. So far this week, the March/May has narrowed $.40/metric ton to $8.80/mt, after closing at a spread of minus $9.60/mt just two weeks ago. The May/July has narrowed by $0.70/mt to a spread of minus $5.60/mt so far this week.

Here are some signals to watch for. The CGC reported exports in week 25 and week 26 as two of the lowest weekly volumes in nine weeks, both below 100,000 mt. Today's GMP Grain Monitoring program reported the vessel lineup for all grains to be below the one-year weekly average for both Vancouver and Prince Rupert, suggesting that week 27 data could also be weak this week when released on Friday.

At the same time, March soybean oil seems to be supported above its 200-day moving average, while the short-term trend in the Canadian dollar remains lower, receiving some pressure from crude oil weakness, which closed lower Wednesday for the fifth consecutive session to reach a fresh low on the nearby March contract. Crude oil spreads continue to reflect a growing bearish view of fundamentals, which could drag the loonie lower.

The continuous active chart shows that Tuesday's low bounced off of support at $457/mt, a weekly low from November, while additional weekly lows show a band from $454 through $457/mt. As well, there seems solid buying interest under psychological support at $460/mt.


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