Based on accessible basis levels found on the internet, old crop canola delivered in the months of May-through-July range from $513/metric ton to $515/mt on average, while prices are shown to weaken to a range of $482/mt to $487/mt in the August-through-November period.
The nearby July future remains buoyant despite current government estimates that indicate that 2017/18 supplies are 1 million metric tons higher than the previous crop year, with DTN's Price Probability Chart showing last week's nearby May close was in the top 5% of the range of futures traded for that week over the past five years.
At the same time, DTN's 5-Year Seasonal Index chart would suggest we are two weeks away from canola's seasonal high in the front-month contract. Vancouver cash canola has also shown signs of weakness in recent days, weakening from $43 over the July to $40/mt over the July on Thursday May 3. Over the past three years, according to ICE Canada cash prices, the West Coast track basis showed its first sign of weakness on May 4 (2015), on May 24 (2016) and on June 21 (2017).
This Friday's Statistics Canada March 31 stocks could be a big deal for canola. December 31 stocks were estimated at 14.146 mmt, a record level and up 762,000 mt or 5.7% from the previous December. Should Statistics Canada continue to find large stocks of canola held on farm, combined with the current pace of demand that has both crush and exports trailing last year's pace of disappearance, both futures and basis could be in for a correction.
It is interesting to note that the current average prairie basis calculated are remarkably close to levels calculated on this day in 2017. This was at a time when AAFC supply and demand tables were pointing to a year-over-year reduction in ending stocks of approximately 900,000 mt for 2016/17 to 1.1 mmt, while this year's tables are pointing to an expected year-over-year increase of 652,000 mt to 2 mmt.
In the December-through-March period of 2016/17, total canola disappearance was 5.450 mmt, while a further 6.586 mmt disappeared in the April-through-July period (crush and exports). Using Statistics Canada's December stocks as a starting point, failure to keep pace with the 2016/17 demand could suggest that ending stocks could be even higher than shown in current government forecasts.
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