Recent strong basis to unwind as canola harvest nears

Canola basis levels have been great, but they shouldn’t be taken for granted, analysts say.

“They won’t last,” said Derek Squair of Agri-Trend Marketing.

“The window will close as the new crop comes in.”

Squair said he has seen basis levels as good as $11 over and often between $5 and $9 over recently.

Especially around the Yorkton- Harrowby area, crushers have aggressively bribed canola out of farmers’ hands.

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“Farmers have slowed down on selling,” said Don Roberts of CanolaInsight.

“But the crushers are still buying.”

Prairie farmers have cleaned out their bins of canola this summer, as $600 per tonne futures were available. There’s not much left in storage and recent futures price weakness has caused farmers to draw back.

“Prices are down, have been going down, and until now whenever they have gone down they’ve gone back up and they get a better price,” said Roberts, explaining farmer psychology.

But Errol Anderson of Pro Market Communications said farmers need to grab good basis offers soon, and not just because of the looming new crop.

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“There’s a risk, with the stock market crunching down on us, that the credit markets are going to start to tighten,” said Anderson.

“If it becomes a global tightening of credit, then basis levels might widen out. There is a risk that money won’t flow.”

If grain companies and crushers start paying more on their lines of credit to finance purchases, they will not be as willing or even able to bid close to or over futures prices, he said.

Squair said his company had urged farmers to sell 90 percent by March, and since then he has encouraged farmers to lock in futures prices.

But they didn’t lock in a lot of basis levels because of the tightness of supplies, and that bid paid off.

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There are still some good deals out there, he said, but with the new crop only weeks away, those will disappear, especially if the crop is good .