In addition to the rise in WCE canola futures prices, canola basis levels also strengthened considerably in the month of February. After being at the lowest levels in the fall months since the 2000-2001 crop year, the best bid basis in the Par pricing region has risen to nearly the rate seen during the last two crop years, when supplies were greatly reduced due to back-toback droughts across much of Western Canada. The combination of rising futures prices and strong basis levels at the farm gate further indicate the strong underlying demand for oilseeds, even though canola supplies have been at near 'normal' levels this crop year.
Even though canola supplies are greater than the previous two crop years, the July 2004 futures are trading at a significant premium to the November 2004 'new crop' futures. The premium for the July canola futures over the November futures closed the month of February at $43.70 per tonne, near the highest level of the current crop year. Trade sources suggest the reason for the significant premium for 'old crop' July futures over the 'new crop' November futures may be concerns about canola supplies running low before the end of the crop year due to very strong domestic canola crush volumes combined with strong canola exports. In addition, some trade sources anticipate that Western Canadian farmers may plant a relatively large number of acres to canola this spring resulting in potentially even larger domestic canola supplies for the 2004-2005 crop year.
