Canada's inability to execute on grain deliveries is evident in the Vancouver cash trade, as indicated by data reported by the ICE Canada Exchange.
In late January, Oil World was indicating the possibility of the global rapeseed/canola trade to reach a record 14 million metric tonnes in the 2013/14 July through June trade, with 7.5 mmt moved in the July to December period. Canada's August through December shipments were 3.46 mmt, a three-year low.
In late February, Oil World indicated that shipments in the January through June period would total 6.01 mmt, 7.4% below last year's movement in the same time period and a three-year low overall. This puts the overall projected exports at 13.51 mmt, with Canada's inability to ship grain "seen as the major culprit for the developing supply shortage on the world market", as reported by Bloomberg.
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This shortage of seed in export positions is clearly impacting the Vancouver cash trade. On Feb. 28, cash trade was reported at $40/mt over the March future, which reflected a price of $458/mt based on that day's March close. This is a drastic improvement over the weakest basis indicated of $11 over the March, last reported on Jan. 8. On March 3, cash trade was reported at $40 over the May future, or a flat price of $477.20/mt. This higher price reflected Monday's rally in canola as well as picking up the March/May spread of close to $10/mt.
On Wednesday, cash trade firmed further to $50/mt over the May, to reflect the strongest basis reported since the first week of the crop year. Unfortunately, this has yet to appear in online bids, although there is talk of specials offered which target farmer's flat-price targets in the $9 to $9.50/by range in the western prairies. This may be the state of the industry for some time to come as companies have the luxury to purchase volume as required to meet their car allocation.
Outside oilseed and vegetable oilseed markets also remain firm which may further increase opportunities for canola. The U.S. government released a bulletin today calling for a 50% chance of an El Nino event this coming summer, which already has the palm oil market on edge as this event can take a drastic toll on palm production in Malaysia and Indonesia. Canola's weakness relative to soybeans, calculated at $123.50/mt relative to soybeans (May future to May future, Canadian dollars) will also act to support canola.
While we have what the world wants, Canada's challenge is to put this seed in an export position.
Cliff Jamieson can be reached at email@example.com
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