(Resource News International) — Crush margins for canola in Western Canada have seen some significant improvement over the past week, with the uptrend continuing in the weeks ahead.
“Based on the way I calculate margins, the crush for the spot month as of Monday was in the $122 per tonne range,” said Bill Craddock, a south-central Manitoba producer and commodity trader.
This was an improvement on the $111-$115 seen at the end of January and more in line with the $122-$130 level seen about a month and a half ago.
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The pull-back in the value of the Canadian dollar has helped to improve margins, but a more important factor has been the developments in the U.S. biodiesel industry, Craddock said.
The U.S. Environmental Protection Agency (EPA) last week announced that soybean-based biodiesel will qualify for production mandates under the renewable fuel standard, a decision welcomed by the troubled biodiesel industry.
The EPA said that 12.95 billion gallons of biofuels will have to be added this year. About 6.5 million gallons must come from cellulosic ethanol and 1.15 billion gallons must come from biomass-based diesel.
The mandate was seen as especially important to the U.S. biodiesel industry since producers lost a US$1-per-gallon government tax incentive that expired on Dec. 31.
Since the expiration of the tax credit, U.S. biodiesel production had slowed because it was too expensive to produce.
A cash dealer, who did not want his name used, noted that while this development deals with U.S. soyoil, there will be positive implications for the Canadian canola sector, especially since the profit margins for crushers are directly impacted by price trends established by U.S. soyoil and soymeal.
As of Feb. 3, estimates from the Canadian Oilseed Processors Association (COPA) indicated that 2.011 million tonnes of canola had been crushed so far during the 2009-10 season. This compares with 2.106 million tonnes at the same time in 2008-09.
Although the crush pace was about 100,000 tonnes behind the year-ago pace, the dealer said, it’s not as bad as it could be.
“With crush margins improving, the demand from the processing sector was also seen picking up,” Craddock said.
“However, the trick will be to get the canola out of the hands of the producers, who are likely to remain likely sellers given current bids being offered.”
