Canola Cash Bids Drop, But Basis Should Tighten

Canola cash prices in Western Canada have fallen in sympathy with the futures market over the past week, but basis levels should tighten in once the futures market re-stabilizes, according to an analyst.

“We’ve not really seen basis levels change a whole lot, yet,” said market analyst Jon Driedger, of FarmLink Marketing Solutions in Manitoba, adding that “cash prices have essentially come down largely in line with what the futures have done.”

The nearby March ICE Futures Canada canola contract has declined by about $40 per tonne from its recent highs over the past week, in what has largely been described as a profit-taking correction. Often when the futures see such a large correction, the basis levels don’t react immediately, said Driedger.

“Everyone is a little gun shy when you see such big moves from one day to the next,” said Driedger.

“Once the market settles down, then it will be interesting to see if we do see some basis levels come in,” said Driedger. He added that the export and domestic crush demand remains strong, “and somewhere along the line these guys will need to continue buying canola.” While the commercials will need to bring in supplies, the sharp drop in prices will make most producers reluctant sellers, which should eventually result in improved cash bids, said Driedger.

Spot canola bids quoted by Prairie Ag Hotwire have declined by about 70 to 80 cents per bushel over the past week, with the high-end bids currently topping out at $12.44 to $12.74 per bushel across western Canada.

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