Canada Markets

The grain trade is showing anything but a hunger for old-crop canola deliveries. As of mid-morning on Wednesday, the average spot basis across the Prairies was calculated at $32.57/metric tonne under the May, which results in an average bid of $422.43/mt or $9.58 per bushel based on today's close.

This is the widest spot basis recorded since late May 2014 and has been on a weakening trend since early November. Old crop basis narrows through the balance of the crop year to suggest a greater need in the summer months, with basis ranging from $22.28/mt under the May for April delivery and $19.54/mt under the May for May delivery. June basis is $12.42 under the July and July is $10.49/mt under the July.

Despite weaker producer deliveries, commercial stocks remain high. Producer deliveries for week 29, the week ending February 22, were reported at 217,200 metric tonnes, the fifth consecutive weekly drop in deliveries and the lowest weekly volume delivered since week 4 while the third lowest weekly deliveries of the crop year.

Commercial stocks, on the other hand, were reported at 1.471 million metric tonnes, marginally lower than the volume reported two weeks earlier in week 27 but remain significantly high. Close to the highest volume reported this crop year, this volume is also 37.4% above the week 29 visible stocks last year when rail transportation issues were the topic of discussion.

One presenter at DTN's Ag Summit in 2013 suggest that a market turn after an uptrend is marked by 1) widening basis then 2) weakening spreads then 3) lower futures. Given that we are currently seeing all three taking place, where the weakening basis appeared prior to any other signals, current market activity could suggest the old-crop highs are in.

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

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