Canada Markets

New-Crop Soybean Basis Bears Watching

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The new-crop basis for soybeans delivered to Hamilton was calculated at $.06/bushel USD over the November contract on Tuesday (yellow bar), which compares to the three- and five-year averages for this date at $.21/bu. under the November. Between January and June, the first trading day of each month saw basis range from $.07/bu. to $.29/bu. under the November. (DTN graphic by Cliff Jamieson)

In Tuesday's Canada Markets blog, we looked at China's aim to relax import restrictions with surrounding Asian companies for oilseeds and products, given the country's move to retaliate against United States tariffs with a 25% import tariff on soybeans. Old-crop data reported for Canada's canola and soybean markets are not hinting at any immediate demand surges, despite rumblings for weeks that China could turn to competing oilseeds to meet its needs moving forward.

As pointed out in a morning Twitter communication, what may stand out is a strengthening new-crop soybean basis seen in certain Ontario markets as exporters eye the growing demand potential. On Tuesday, the new-crop bid for soybeans delivered into the Hamilton market resulted in an adjusted basis of $.06/bushel USD over the November contract, as indicated by the yellow bar on the attached graphic. Stripping out the effect of the Canadian dollar allows for a more reliable comparison from period to period.

Both the three-year and five-year average for this date are calculated at 21 cents under the November future. The trend over the past six months shows a strengthening basis as indicated by the first trading day of each month. On Jan. 2, this basis was calculated at 29 cents under the November, while on June 1, this was calculated at 22 cents under.

Buyers may perhaps facing new-crop demand they have yet to see in the past, with China facing significant needs in the fall as South American supplies dwindle prior to the new-crop harvest in Brazil and Argentina.

Given the basis calculated Tuesday along with Wednesday's $8.89/bushel November close along with a $.75 CAD/USD exchange, new-crop bids are nearing $12/bu. and could prove a popular starting point for new-crop pricing.

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DTN 360 Poll

Given that current government estimates are pointing to a large year-over-year increase in ending stocks for a number of grains, this week's poll asks which of these crops you are least likely to market prior to new-crop arrival. Please weigh in with your thoughts on this week's poll, found at the lower right side of your DTN Canada Home Page. Thanks for your participation.

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

Follow Cliff Jamieson on Twitter @Cliff Jamieson

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