Across the nine prairie regions monitored by pdqinfo.ca, cash bids for canola increased from $17.74/metric ton (mt) to $19.64/mt on Dec. 28 trade, with bids averaging from $1,001.27/mt to $1,011.98/mt. This marks the first time since Nov. 26 that the average bid was above $1,000/mt for all nine regions.
Market watchers will note both strengthening futures and basis on Tuesday. The March contract closed $14.80/mt higher for the session, with cash basis strengthening from $3.03/mt in eastern Manitoba to as much as $4.84/mt in southeast Saskatchewan.
This may be a sign of what is to come for this market, given the bullish fundamental outlook. Since pdq shifted to reporting prices against the March future on Nov. 1, basis across the nine regions has weakened from $32.34/mt in southwest Saskatchewan to $41.91/mt in the Peace Region of Alberta. The most weakness was seen in the northern Alberta region at $40.87/mt ($0.93/bushel) and the Peace Region at $41.91/mt ($0.95/bu). The attached chart shows this trend for the northern Alberta region for this period.
Several factors make this basis worth watching. Given the four-day break in trade during the Christmas period, it is likely that buyers widened basis as protection over this period. Cold weather will be a challenging factor across the Prairies, with Environment Canada reporting extreme cold temperatures across almost all the Prairies and price will be a tool used to entice deliveries.
Railways continue to increase movement to recover from the outage to the West Coast in November. In week 20, the AG Transport Coalition reports that Canada's two main railways spotted 67% of the cars wanted for loading, increasing for a third consecutive week after dipping as low as 49% in week 17.
In addition, demand for canola continues. As of week 20, Canadian Grain Commission data shows both exports and crush ahead of the steady pace needed to reach the current export forecast. Agriculture and Agri-Food Canada (AAFC) reduced its forecast for crop year exports by 100,000 mt, to 5.4 million metric tons, while the current pace is roughly 701,000 mt ahead of the steady pace needed to reach this forecast. The pace of domestic disappearance is roughly 382,300 mt ahead of the pace needed to reach this forecast. If current estimates are correct, this pace cannot be sustained for long.
Cliff Jamieson can be reached at firstname.lastname@example.org
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