Canola crush margins deteriorating

(Photo courtesy Canola Council of Canada)

CNS Canada — Canadian canola crush margins continue to drift lower and currently find themselves at some of their worst levels in over a year.

Declining demand for canola oil, together with the fact that a lack of farmer selling is forcing processors to pay up to bring in canola seed, was behind some of the weakness in crush margins, according to a trader.

Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring in to the equation.

As of Wednesday, the canola board crush margin calculated by ICE Futures Canada was at about $73 above the most active July contract, which compares with levels over $80 a month earlier.

At this point a year ago, crush margins were more than double current levels, but had been down to only $25 above the futures if going back two years to May 2013.

Domestic crushers processed 127,333 tonnes of canola during the week ended May 13, 2015, according to data compiled by the Canadian Oilseed Processers Association.

That represented only 70 per cent of domestic crush capacity, and compares with the year-to-date average crush capacity utilization of just over 81 per cent.

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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