Questions on Canola Basis?

[boarderbloke]

Just wondering what others are thinking as far as Basis goes. If this market is Demand driven, is there any chance that we would/could see narrower Basis from now to when the price drops off? {near by Basis 60-80 cents, JULY 50 or so, NEW CROP w/ fall delivery 90-125 cents}. I mean if they really want canola, would they not drop the Basis? Will all companies stick together on their wide Basis till perhaps one company is coming up short, and they drop to fill rail cars?
Just wondering what others are thinking regarding Basis, will it continue to widen, stay as is, roughly, or will Basis narrow?
Does everyone want to empty their bins of OLD CROP?

[Hopperbin]

At Bunge signing the basis ahead and waiting to price has been working good so far this year. Myself I am now sold out to deliver the last of my Canola in March, to lock the future price yet. Last week I locked that basis in for 23 under, it is now 30 under. For new crop I would think a lot of crushers are booking near capacity going into January now. I am still completely unpriced for new, and thinking to take out a contract for Jan. del. for 12.92 as of monday price or just the basis.
I don't think the new crop basis has any chance of narrowing until into 2012, the new crop should be huge plenty of moisture. Could be lots of extra deliveries after harvest as if the price holds it is going to be a profit. How much canola is still in farmers hands today, good question. Just my thinking, probably don't help you much.

[charliep]

I would watch the pace of disappearance. Canola crush and exports are running a dizzying pace.

I will put up the links to CGC weekly statistics during the first 6 months of the crop and the pace relative to forecast final values.

[URL="http://www.grainscanada.gc.ca/statistics-statistiques/gsw-shg/2010-11/week-semaine-26/gsw-shg-1-eng.htm"]CGC[/URL]

<a href="http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sdd5325">canola s and d</a>

<a href="http://www.agric.gov.ab.ca/economic/stats/wkgrain.html">bottom page</a>

As canola supplies tighten up, would look for basis levels to narrow.

[dschill]

I personally think basis on all commodities have been extremely strong through this rally...canola is no exception. A strong basis in a futures rally underlines the strong fundamentals of the rally. This rally reflects real demand, real shortages, real problems. The rally of 08 was more speculative/technical in nature, thus we saw HUGE basis swings as result of end-users not really needing the product for what the speculators were willing to bid the board prices to. Keep an eye on planting progress, that's gonna be the first indication of where we go.

[silverback]

We also locked in a lower basis last year, but a large company here has a basis of nearly $60 under for old crop. I wouldn't call that a strong basis, I would call it something else entirely.

[furrowtickler]

When canola has to be bought again (may - july) Basis will narrow. I agree with Charlie here. Canola is still being pushed into the system in most areas before road bans.

[cottonpicken]

Would love to see this baby go into contango.

[boarderbloke]

We should be getting contango for all the DDC the buyers are taking 1,2 or 3 months late!

http://en.wiktionary.org/wiki/contango

[dschill]

Ontario Basis
7 to 13 old crop

-10 to 0 new crop

hasn't moved through the rally.

ds

[boarderbloke]

Thanks for all the comments. Lots to think about, will be watching closely.

[TOM4CWB]

Boarder,

If you want to plan ahead... there are decent basis contracts for May 2011.

I just did one at $15/t under... $13.80/bu.

Logistics are tight this year... but it looks like movement is there if preplanned and time to put the sale in place.

[boarderbloke]

TOM, -15 MAY is good, did it drop recently, or is that where it's been hanging?

[TOM4CWB]

Boarder,

At local elevator in Killam.

Would be surprised if not anywhere in Alberta.

Logistics is the issue... things are backed up...

[charliep]

If you look at the CGC numbers, about 1.5 MMT in the system. Canola exports and crush to the end of January about 6.7 MMT or a pace of about 1.1 MMT/month. Deliveries 6.9 MMT. Need to see the commercial inventory come down before basis levels start to tighten.