Winnipeg Commodity Exchange: Canola Futures Prices Trend Lower

Canola futures prices at the Winnipeg Commodity Exchange continued to trend lower during the month of November. The January contract closed the month at $280.70 per metric tonne, off $19.10 during the month. This was also the lowest closing price for the nearby contract in over three years, going back to the spring of 2001. One of the major factors in the sell off is large canola supplies in western Canada and other canola/rapeseed producing countries combined with a record large soybean crop in the United States. Despite lower prices, some analysts are also somewhat concerned about demand, as both exports and domestic crush levels are down from last year’s levels. The strong Canadian dollar, high ocean freight rates and abundant oilseed supplies globally may be impacting exports, while reduced domestic crush levels may be impacted by weaker margins.

Despite the relatively large canola crop, basis levels have held up reasonably well across the prairies. The average basis for elevator bids in the Par pricing region near Saskatoon, Saskatchewan averaged approximately $25 under the January futures price during the month of November. This is slightly above the five year average for the region and significantly better than last year’s depressed basis levels during the fall and early winter. Traders indicate that the combination of a delayed harvest and reduced prices have caused some producers to hold back on canola deliveries to the elevator system, therefore resulting in some support for basis levels.

Canola crush margins are off significantly this year compared to the record highs of this previous spring. The canola board crush margin ended the month of November at $26.80 per tonne, still within the relatively narrow range that has been established in the past couple of months