CNS Canada — Despite a turbulent start to the week for most commodities due to China’s stock market crash, basis levels for canola remain relatively attractive in Manitoba and much of the Prairies, according to an industry watcher.
Canola growers have been receiving cash prices of roughly $10.50 in Manitoba and parts of Saskatchewan, said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.
However, he noted Tuesday morning, prices were a touch softer in central Saskatchewan.
“Basis levels are holding value; they’re basically at an average level with some places showing some narrower basis from traditional levels.”
The November-January spread, which had been at an adverse, moved to a small carry on Tuesday. The front month is now $3.30 below the January contract.
This is likely a sign stocks aren’t as tight as they used to be a week and a half ago, he said. “So the market needs the farmer to be a continuous seller.”
However, he added, Canada’s elevator system hadn’t become burdened with too much canola supply yet.
The situation should change soon once the crop starts to come off, but Klassen said it’s a situation that still needs to be monitored closely.
“Producers need to watch the November-January spread and if they continue to see it widen out, that will be a sign that basis levels will start slipping in the country.”
As for the effects of China’s stock market crash, Klassen said much remains to be seen.
“If we get to February and nothing’s happened, the trade will start to factor in sharply lower demand.”
However, he said, many observers expect China, which has been a large buyer of Canadian canola in the past, to rediscover the traditional appetite it has for the Canadian oilseed.
“It’s a kind of a wild card but they’ve been a major player the last few years. A certain amount of demand will keep our stocks snug for the year,” said Klassen, adding most of the trade anticipates China stepping forward at some point.
— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.