Crushers continue to aggressively seek canola

Crush margins for processors in Western Canada have been continuing to grind slightly lower the past couple of weeks, but the effort to secure canola supplies from farmers by this sector continues to remain aggressive, according to industry participants.

"Based on my calculations, crush margins for canola are currently in the $56 per tonne range, which is down from the $62 level seen earlier in the week," said Bill Craddock, a southern Manitoba farmer and private commodity trader. His version of crush margins had declined to $46 at one point during the time period, he said.

This would also compare with margins for processors that were in the $82 per tonne area at the same time a year ago.

The need of domestic processors to pry canola out of the hands of farmers was linked to the grinding lower of crush margins, said Mike Jubinville, an analyst with ProFarmer Canada in Winnipeg.

Domestic processors located in southern Manitoba were said to be the most aggressive, with cash bids of over $14 per bushel being offered.

Craddock noted that the basis for canola at a southern Manitoba processor was $18 per tonne over the futures price for January delivery, $22.50 over the futures for delivery in February and $27 over if the canola was delivered in March.

In Saskatchewan for comparison purposes, the basis for canola was $5 under the futures price for canola at some locations.

Jubinville noted that at $14 per bushel, farmers may be enticed to deliver canola as that was probably the highest value seen in quite some time. Craddock noted that he had not seen values of that magnitude since 2008.

Cash bids for canola could get as high as $14.50 a bushel, Craddock felt, but added offers like that would not be long-lived.

Jubinville felt farmers, who have not been aggressively selling canola out of their bins, should take advantage of the current cash offers. "At least a portion of the canola their holding should be sold at these levels," he said.

Strong sales commitments to the U.S. and China have helped to stimulate the need for crushers to secure enough canola to meet those commitments, a broker commented.

Concerns about canola supplies in Canada becoming extremely tight by this spring also have spurred processors to cover their needs, sooner rather than later, Jubinville said.

Statistics released by the Canadian Oilseed Processors Association confirmed the crush pace in Canada continues to run at a near-record level. As of Wednesday, Canadian processors had crushed 3.318 million tonnes of canola, ahead of the 3.012 million-tonne pace at the same time a year ago.

Processors in Canada crushed a record 6.99 million tonnes of Canada during the 2011-12 crop year. Agriculture and Agri-Food Canada, in its December supply/demand tables, estimated processors would crush 6.5 million tonnes of canola during the 2012-13 season.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.