Canada Markets

Western Prairie Canola Basis Strengthens

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The four lines represent the reported canola cash basis for northern and southern Alberta along with northwestern and southwestern Saskatchewan, which has shown signs of strength in early 2020. (DTN graphic by Cliff Jamieson)

Cash canola prices are seen strengthening on the western prairies, with cash data from pdqinfo.ca reporting a range for four regions including northern and southern Alberta and northwest and southwest Saskatchewan from $449.19 per metric ton to $455.43/mt on Jan. 8 ($10.19/bushel to $10.33/bu), the highest price levels seen since late February.

Cash markets showed signs of strength in pdqinfo.ca's roll from the January to March future as of Jan. 1. While the Jan/March futures spread was shown at $10.60/mt at the time of the roll, the cash basis only weakened from $6/metric ton to $7/mt in the first days of January across the four regions viewed, averaging $6.35/mt.

As a result, canola prices are off to a good start for 2020. Between Dec. 31 and Jan. 8, the March contract has gained $2.60/mt, while cash prices reported for the four regions discussed gained from $7.91/mt to $9.50/mt over the period, with basis doing the heavy lifting.

As of Jan. 8, the basis reported for northern and southern Alberta was roughly $2/mt weaker than the three-year average for these areas, while for western Saskatchewan, ranges from roughly $4/mt to $5.50/mt weaker than the three-year average for this day.

Cash trade in Vancouver has also shown signs of strength this week, strengthening $5/mt to $20/mt over the March since Jan. 3, which bears watching.

Another signal that bears watching is the May/July futures spread. This has narrowed from minus $6.30/mt on Dec. 31 to minus $4.90/mt on Jan. 8. This may signal a neutral view of market fundamentals, while moving toward what may be viewed as a bullish view of fundamentals.

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

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