Canola crush margins take downturn

(Resource News International) — Crush margins for canola in Western Canada have taken a severe downturn with firmness in the Canadian dollar and the sell-off in CBOT soyoil futures linked to the weaker trend.

“Based on the way I calculate margins, the crush for the spot month as of Monday was in the $111.50 per tonne range,” said Bill Craddock, a south-central Manitoba producer and commodity trader.

This compares with margins of $119 per tonne last week and the $129.50 seen on Feb. 26. Prices on Dec. 8 last year had hit $131.50 while on Nov. 20, the crush margin was as high as $139 per tonne.

The steady strengthening of the Canadian dollar has helped to deteriorate margins, but the fact that soyoil values in Chicago have been losing value has also hurt the crushers’ profit/loss margin, Craddock said.

Delays in an announcement from the U.S. Environmental Protection Agency (EPA) regarding the soybean-based biodiesel tax credit program have contributed to the weakness in CBOT (Chicago Board of Trade) soyoil.

The program is seen as especially important to the U.S. biodiesel industry since producers lost a US$1-per-gallon government tax incentive on Dec. 31, 2009. Since the expiration of the tax credit, U.S. biodiesel production has slowed because it has become too expensive to produce. 

While the profit margin for domestic processors has declined, Craddock felt that most companies were still working in the black, and not red ink.

“At one point, a crusher with a margin of $30 was making a profit,” Craddock said. “Now that same profit margin might be in the $50 to $100 per tonne range.”

With all the extra capacity coming on board across Western Canada, he said, it was hard not to believe that the margins were still very profitable for the various oilseed companies.

However, Craddock cautioned, while domestic processors may still continue to offer strong bids in order to get producers to deliver canola up their driveways, once the company has covered needs, those bids could disappear pretty quick.