Canada Markets

Prairie Canola Crushers Remain Aggressive

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Crusher canola bids in Western Canada remain much more aggressive than export bids. Based on accessible internet quotes, export-facility bids averaged $29.28/mt under the July (red line) on Tuesday, as compared to $7.88/mt under calculated for crushers (blue line). All other points lead to calculated levels in the first few days of each month starting in January. (DTN graphic by Nick Scalise)

A DTN reader reported close to a dollar per bushel spread ($44.09/metric ton) between the reader's local elevator bid and the closest crusher bid in Saskatchewan, less incremental costs to have it delivered. DTN reports have focused on this crusher resilience for a period of time, with the ongoing concern that this trend could break and weigh on crusher bids, although improved crush margins have seen crushers continue to seek deliveries at far more attractive levels than seen at most country elevators.

The Canadian Canola Board Margin Index reached a recent high of $122.90/mt on June 2, well-above the $76.09/mt reported a month earlier and the $77.72/mt reported a year earlier. It has since been under pressure, slipping to $114.01/mt on Monday and to $104.86/mt today, down $18.04/mt from the high.

After struggling with Fibonacci retracement resistance on the nearby soybean oil chart over the past four sessions, July soybean oil futures turned lower for the first time in seven sessions, with today's trading bar showing a bearish outside-day trading bar, trading both higher and lower than Monday's trading range while closing lower. Stochastic momentum indicators are showing signs of potentially rolling over while in the neutral zone on the daily chart.

Soymeal trade for July delivery is also showing weakness, closing lower in each of the past three sessions while consolidating within last week's trading range. Weakening spreads are pointing to a less bullish approach by commercial traders and could point to a slowing in demand.

Also weighing on the crush returns is the move higher in the Canadian dollar, which will reach at least five-week highs this week, pulled higher by the move in crude oil which saw crude reach the highest level today seen since early October on the continuous chart.

Today's basis calculations showed one crusher narrowed further to a $5/mt over basis since last look late last week, although one could question just how long this could last. Increased selling could quickly see these premiums eroded.

It certainly pays to shop around, with today's strongest basis at $5 over compared to today's observed weakest basis was at $47/mt under, a $52/mt or $1.18/bu spread.

A continuation of the current pricing seen by the crushers could point to the possibility that prairie stocks are tighter than expected, but time will tell.

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

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