While the increase in canola futures prices has been largely influenced by the sharp rally in global oilseed prices, the advance in canola has not kept pace with the advances in CBOT soybean futures prices. As a result, WCE canola futures actually closed the month of October trading at a discount to CBOT soybean futures for the first time since January 2001. It was only a year ago when WCE canola futures were trading at a $125.00 per tonne premium to CBOT soybeans. Trade sources suggest that reasons for the advances in canola futures prices lagging those of soybean futures prices include a strengthening Canadian dollar relative to the US dollar, and tight US soybean supplies compared to Canada's return to more normal production levels of canola.
Recent market activity has resulted in the canola board crush margin surging upwards in the past two months. This has been due, in large part, to the increases in the price of canola seed lagging the increases in the price of soybean meal and oil. This has resulted in the highest board crush margin calculation in several years. For illustrative purposes, the board crush formula used is as follows:
[(CBOT Soybean Oil * 22.0462 * 0.40 * US Exchange Rate) + (CBOT Soybean Meal * 0.75 * 0.60 * 1.102 * US Exchange Rate)] - WCE Canola Seed = Canola Board Crush Margin in Cdn $
Note: 22.0462 is converting soybean oil into metric values; 0.40 indicates that approximately 40 percent of the canola seed is oil and 0.60 indicates that approximately 60 percent of the canola seed is meal; 0.75 indicates that canola meal has approximately 75 percent as much protein as soybean meal.
