Farmers aren’t getting money for canola because they won’t sell it.
Canadian canola crushers aren’t making much money on canola because they can’t get it from farmers for a good price.
And analysts say neither side will make much money this winter.
With canola prices depressed compared to recent years, farmers’ best hope is to jump on sudden demand signaled by quick improvements in basis bids, say analysts.
“There won’t be long-lasting opportunities,” said Errol Anderson of Pro Market Communications in Calgary.
Read Also
Vegetable oil stocks are expected to tighten this year
Global vegetable oil stocks are forecast to tighten in the 2025-26 crop year, this should bode well for canola demand.
“They’ll be there and then they’ll die off. It’ll be a year of spot markets.”
Analysts say the huge U.S. soybean crop and other big oilseed crops around the world have calmed the market’s short supply fears, making any substantial rally difficult.
The only happy signal in the market is the relatively higher demand for canola oil than soybean oil. That is pushing Canadian oilseed crushers to slash basis levels even though crushing returns are only at break-even levels.
It’s been a tough year for crushers.
“Growers are kind of holding off for better prices like they’ve seen in the last couple of years, but with the stronger Canadian dollar and the fundamentals of the market, that’s not overly realistic,” said Woody Galloway, manager of procurement for Bunge Canada in Mississaugua, Ont.
“It’s kind of hard (for crushers) to operate in this kind of an environment and make money. A rising Canadian dollar is good if you’re importing product, but that’s not what we’re in the business of,” said Galloway.
“If we’ve got to move (canola oil) offshore to keep our plants going, we’ve got to discount our basis levels to offset the currency moves.”
Crushers make money by selling oil and meal for more than they paid for the seed, plus their operating costs.
Canola crush margins have improved in recent weeks and Canadian crushers have moved quickly to fill oil demand when it appears.
Incentive to sell
To pry the needed canola seed from farmers’ hands, companies have posted improved basis bids in a few places recently.
Zero-under basis levels have briefly appeared in Manitoba and narrow basis levels have also temporarily appeared in Alberta.
“They know the trigger points and they’ll do whatever they need to to get the product,” said Anderson.
Canola’s reputation as a healthy oil compared to soybean oil is probably behind these sudden price phenomena.
“The trans fat issue is helping us out, so the crushers will have the capacity to bid very attractive basis levels here and there.”
But Anderson said farmers must grab these opportunities fast because the good basis levels are not being driven by overall market demand.
They are driven by local and short-term crusher needs.
“These really nice spot deals, where all of a sudden the basis levels are really attractive, may last only a few days,” said Anderson.
“They should really take advantage of it … they’re not long-lasting opportunities.”
Alberta Agriculture market analyst Charlie Pearson agreed.
Crushers that need canola right away are willing to pay for it, but once they’ve met their needs, that good basis is gone.
So farmers should be watchful of changes in basis, said Pearson.
“That’s a good sell signal for the market, if they start seeing those premiums that don’t make a lot of sense. It’s a good strategy just to sell.”
