Crush margins for canola decline, processor demand strong

Crush margins for canola processors in Western Canada have been steadily declining, but demand from this sector for canola continues to remain strong, according to industry participants.

"Crush margins, based on the way I calculate them, have dropped to around the $53 per tonne range, which is probably at the lowest level seen during 2012," said Bill Craddock, an independent commodity trader and Manitoba farmer.

During the past month margins for processors, by his calculations, have generally ranged from $58 to $62 per tonne and a far cry from the $82 per tonne level seen at the same time a year ago.

Part of the decline in the margin was associated with the fact that values for U.S. soyoil and soymeal have declined significantly, Craddock said.

Some firmness in the Canadian dollar and the continuous need of processors to coax canola out of the hands of farmers has also hurt the profits of crushers, he said.

Premiums ranging from $17 to $20 were being offered by some crushers, with the value dependent on the region of the Prairies, market analysts said.

Strong sales commitments to the U.S. and China has 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 stimulated the need of processors to cover their needs, sooner rather than later, the broker said.

Statistics released by the Canadian Oilseed Processors Association (COPA) confirmed that the crush pace in Canada continues to run at a near-record pace.

As of Wednesday (Jan. 2), Canadian processors had crushed 3.045 million tonnes of canola, which was ahead of the 2.747 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.

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