Canola crush margins ease, processing pace stays strong

Crush margins for processors in Canada have eased to their lowest level in quite some time, but processing remains at a strong pace, according to industry sources.

“Based on my calculations, crush margins for canola dropped to their lowest level in quite some time late last week to around the $23 per tonne area,” said Bill Craddock, a southern Manitoba farmer and private commodity trader. In March, crush margins for processors had been running in the $28 to $35 per tonne area.

At the same time a year ago crush margins for processors had been running in the $75-$85 per tonne level.

Craddock linked the decline in crush margin to the fact that domestic processors have had to pay up in order to encourage farmers to deliver canola to their doorstep.

One private analyst had crush margins actually working in negative territory, but that was linked to that individual’s crush margin calculation.

“Whether crush margins were in negative or positive price territory, the idea of the processing pace staying strong was unlikely given the old-crop supply situation,” Mike Jubinville, an analyst with ProFarmer Canada said.

He acknowledged processors in Western Canada were pretty resilient and probably will be successful in obtaining the necessary canola to fulfil commitments both from a nearby and deferred standpoint. At some point, however, the pace will need to slow to avoid running completely out of the commodity before new-crop supplies are available in the fall.

“The only way processors can continue to maintain a strong crush pace is if canola stocks are actually much higher than what is currently being forecast,” Jubinville said.

He said it was conceivable that Statistics Canada has underestimated the size of last year’s crop.

“Considering the USDA was able to find extra old-crop soybeans lying around, even though everyone else had thought supplies were virtually depleted, there are ideas that a similar situation could occur with Canada’s government agency,” Jubinville said.

Statistics Canada will release its grain stocks in all positions report on May 3.

As of April 3 in the 2012-13 crop year, data from the Canadian Oilseed Processors Association shows that 4.766 million tonnes of canola has been crushed, which compares with 4.595 million at the same time a year ago.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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