As shown on the attached chart, the Vancouver cash basis for canola has widened from $80 over the May to $45 over the May in less than a month, according to reporting by the ICE exchange.
A combination of increasing supplies on the west coast along with growing weakness in oilseed demand, led by actions in China, may be behind the move.
The average weekly unloads for canola at west coast terminals was just shy of 198,000 mt over the past five weeks (week 32 to week 36), with three of the five weeks seeing unloads top 200,000 mt. This is a sharp contrast to the average of 128,000 mt shipped in the five weeks prior and may continue to improve as the two railroads push to meet their combined targeted movement of 1 million metric tonnes of total grain movement on a weekly basis.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
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The weakening of the cash basis, which began on March 27, is consistent with the timing of the weakening soybean basis seen in the Gulf of Mexico. The soybean basis was reported at 90 to 95 cents over the May on March 26, fell to 78 to 95 cents over on the 27 and is reported at 65 to 66 cents over the May for April 23.
This comes at a time when China is defaulting on soybean purchases made and some vessels being loaded out of Brazil are being diverted to alternative destinations, such as the United States. Reports suggest that China has cancelled 500,000 mt of soybean purchases so far, with the potential for an additional 1.2 million metric tonnes that could be cancelled.
To make matters worse, Bloomberg reports that China may auction off some 3 mmt of soybeans for domestic use, which is suggested to be one-third of the country's state-owned reserves, while another unconfirmed social media communication has stated that a release of state-owned rapeseed may also take place.
This news is not good news for oilseed prices while the coming weeks may shed more light on how this situation will play out.
Cliff Jamieson can be reached at email@example.com
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