With widespread harvest activity just around the corner on the Prairies, the cash canola basis is seen strengthening in recent days and since the beginning of the month, based on accessible internet bids reported by grain companies and crushers.
The average prairie basis was calculated at $25.92/metric ton under the November today, which compares to the $29.44/mt under basis calculated at the beginning of the month. This is in contrast to the steady-to-weaker basis that is seen on the attached chart for the same month in 2014/15/16. While fundamentals appear long-term bullish for canola, basis remains weak relative to what is shown for the same month in 2014 and 2015.
Over the course of the week, futures spreads have mostly strengthened, signaling long-term commercial bullishness, with the Nov/Jan ending at what could be viewed a neutral spread of minus $4.90/mt, while the Jan/March ended at a weak carry of minus $2.90, the March/May at minus $.70/mt and the May/July at minus $.40/mt. This is clearly a sign of longer-term concerns.
While it is hard to know where we go from here, a continuation of strengthening basis through harvest could be a sign of what is to come for the crop year, with chances very likely that total supplies could fall short of the demand realized in the 2016/17 crop year.
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