Canada Markets

Weak Crush Data, Potential Strike Fail to Slow Interest in Cash Canola

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart approximates the trend in the Canadian Canola Board Margin Index, a proxy for the returns generated crushing canola, which broke an upward-sloping trendline earlier this month while Thursday's trade saw this index slip below the Aug. 18 low to reach the lowest level seen this crop year. (DTN graphic by ProphetX)

Recent strength in canola futures, combined with weakness in both soybean oil futures, soymeal futures and the Canadian dollar have combined to weigh heavily on this Canadian Canola Board Margin Index, as indicated on the attached chart. While this calculation may vary slightly from the Canadian Oilseed Processors Association calculation due to the choice of the exchange rate used to produce the index, the trend will remain the same.

The attached chart shows today's index breaking below the low reached in August for the lowest index or signifying weakest return crushing canola seen this crop year. Today's low of $50.46/metric ton is below the Aug. 18 low of $51.46/mt and down 45.6% from the $92.76/mt crop year high reached in March.

Despite this move, farmers were winners on Thursday with a solid move higher in futures while basis levels reported by some crushers are still aggressive. At least one option price bid or zero basis is reported by a crusher for July delivery, with another at $3/mt over for the same month. As well, a producer report indicates a pricing opportunity that represented in excess of $8/mt over the July that involved delivery as soon as May.

Week 37 commercial stocks are reported at 1.4 million metric tons, or close to 13% higher than the five-year average for this week, while country space remains tight, buyers still seem keen to own supplies ahead of what will be a compressed spring season. This is despite industry estimates that point to ending stocks swelling this crop year, which should lead to a buyers' market late in the crop year.

This activity is not limited to the crush side of the industry, with some exporters on CN track in central Saskatchewan keen to own grain by offering premiums on Thursday. This is despite a potential CP strike that could lead to more grain pushed towards CN track should a strike take place.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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