Canola crush margins remain profitable

(Resource News International) — Canola crush margins for western Canadian processors have held at some fairly profitable prices lately and there are ideas those levels will hold in the near to intermediate future.

The ability of the margins to hold profitable levels comes despite the fact canola futures have experienced some pretty significant advances recently, said Bill Craddock, a southern Manitoba producer and commodities trader.

Based on his calculations, Craddock said, crush margins were running in the $80 per tonne range. This was up slightly from the level seen at the beginning of the month, but still below the year-ago price of $117.

The margins have also held given the strong pace of farmer deliveries into the cash pipeline.

“The key factor holding the crush margins for processors at pretty good levels is that they have an aggressive sales program in place and need to acquire all the canola they can get their hands on,” he said.

The extra canola crush capacity in Western Canada was also helping to absorb the steady farmer deliveries.

“The canola crush sector is currently running at around 90 per cent of utilization, which is a pretty significant level,” Craddock said.

Data from the Canadian Oilseed Processors Association (COPA) showed 1.399 million tonnes of canola have been processed so far during the 2010-11 crop year, well ahead of 901,006 tonnes at the same time in the 2009-10 season.

Industry participants fully anticipated that Canada’s canola crush pace in 2010-11 will easily surpass the year-ago level.

Agriculture and Agri-Food Canada in its October supply/demand projection estimated Canada’s domestic crush at a record 5.5 million tonnes, which compares with the previous record of 4.788 million in 2009-10.