Elevators open, basis levels improve

After months of yearning for it, farmers now have better opportunities to move crops.


However, many farmers will have the excruciating task of trying to balance seeding with their desperate need to bring in cash to the farm. This is the easiest and worst time of the year to move crop.


“It may make for an intense seeding period, because in some areas they haven’t been able to move much all winter, so everybody still has to move for cash flow,” said Brian Voth of Agri-Trend Marketing.


Farmers are reporting that grain elevators and other crop buyers are interested again in buying crops and are offering acceptable, if poor, basis levels.


Analyst John De Pape, of Farmers Advanced Risk Management Co. says his FARMCo index pegged average prairie canola basis at $35 per tonne under and wheat at $1.75 per bushel under in the week of April 30.


It was much improved from deep winter lows of more than $2 per bushel under for wheat and more than $60 per tonne under for canola. 


With delivery possible in many locations and basis levels that are not terrible, farmers who need money this growing season should try to move crop soon.


“You’re going to want to bring in the canola now, and wheat,” said De Pape, who expects to see the best old crop basis levels appear in late May as seeding becomes most intense and farmers become too busy to deliver grain or even think about arranging delivery. 


Once the crop is in the ground and farmers have more time, buyers might start worsening the basis again. 


Analysts said delivery opportunities and better basis levels have been expected this spring because the railways can more easily haul crops in good weather and farmers become less willing to haul to the elevator. However, they are still pleased to see the improvement actually occurring.


Jon Driedger of FarmLink Marketing said farmers have opportunities to deliver but should call around more than they probably want to at seeding time.


Basis levels can vary a lot from one elevator to the next.


“We’ve been seeing a lot of variability,” said Driedger.


The main factor seems to be whether a particular elevator point has a train coming in. Many elevators are still nearly full.


A second factor can be the approach of the elevator company. Driedger said one line company recently swallowed all increases in canola futures prices with expanded basis charges, so farmers looking only at their cash price wouldn’t have seen the rally that was occurring. 


However, they could have grabbed the gains if they called other local elevators.


Wild Oats analyst John Duvenaud said there are many weird dynamics on the Prairies as the clogged system flushes out section by section and different shipping channels open.


One particular wrinkle seems to be the impact of the new federal rules on grain car movement, which force the railways to move a certain amount of grain but do not define where it must go. 


That seems to be causing the railways to focus on a few routes at the expense of others, which means points that rely on unfavoured destinations have trouble moving product.


“The railroads are saying where the cars are going to go,” said Duvenaud.


De Pape said Manitoba and the eastern Prairies have seen noticeably better basis improvement than western areas, which he attributes partially to Thunder Bay going back into business. 


Voth said he also noticed peppy Manitoba basis and delivery, which he attributed to the plethora of delivery markets that Manitoba crops can reach but other prairie farmers don’t have access to. 


Eastern Manitoba farmers can ship to Minnesota oat buyers, to North Dakota, Saskatchewan and Manitoba canola crushing plants, to elevators on railroads that are hauling east to Thunder Bay, south to the United States and west to the Pacific coast.


Those market choices have meant that eastern Manitoba basis bids have been better this winter than across the rest of the Prairies.


“We’re kind of in a bubble. That’s become obvious in the last 12 months,” said Voth.


Farmers in the central Prairies are now celebrating $35 under basis for canola, but farmers in eastern Manitoba could get plus $3 per tonne at Bunge’s Altona plant and plus $8 at the plant in Havelock, Minn., in the week of April 30.


“In a year when you have 18 million tonnes of canola … it’s totally mind boggling to see a plus basis,” said Voth.


Duvenaud said the basis improvement is a relief to thousands of farmers who have been crop rich but cash poor. The glut of crops this winter meant that farmers received poor prices even if they could move a crop 


“In February you were lucky to get $11.50 (per bushel) flax, but now it’s $14 f.o.b. anywhere on the Prairies,” said Duvenaud.

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