Canola crushing margins excessive in Canada?

[chuckChuck]

From the previous post of an article by Ken Rossasen.
"The Canadian canola market is not exemplary, as Ritz would have you believe. The processors’ crushing margin for a bushel of soybeans in the U.S. is normally 30 to 90 cents per bushel.

The margin in the Canadian canola crushing industry is frequently in the $2 to $4 per bu. range. Canola at $12 per bu. has been a good crop. With reasonable competition, one might have expected $13 or more".

Anybody want to explain why the margins in the Canadian Canola crushing industry are so much higher than the US soybean industry?

Is the open market for Canola not efficient at maximizing returns to producers? Or is there a lack of competition?

[chuckChuck]

This thread is not about the CWB.

[gregpet]

<a href="http://www.agrimoney.com/news/soy-crushers-struggle-while-canola-peers-thrive--
3447.html">Here is your answer</a>

Be prepared for some post CWB questions and hopefully you can answer them directly instead
of try to sidestep.

[chuckChuck]

How many times do I have say this not about the CWB. Post your own thread if you want to talk about the CWB!

[gregpet]

Fortunately your time of dictatorship is over. I posted an answer.
You on the otherhand have never directly answered any questions
that were critical of the CWB.

Read the article. Canola oil crushers cannot meet demand.
Simple. Something the CWB failed to understand.

[chuckChuck]

I read the link.

So soybean crushing margins are $28 per ton and Canola $129 per ton because of the difference in market fundamentals, oil and demand for meal. Okay.

Are the soybean crushers making a profit at $28?

If the soybean crushers can survive at $28 why do the canola crushers need $129? Why aren't farmers getting a bigger share of the crush margin?

Are the $129 crush margins justified or excess profit in an uncompetitive market?

Why haven't farmers invested in canola crushing facilities to capture some of the additional crushing value?

[gregpet]

All valid questions. My guess is that there is more room for
expansion. When this happens margins will decline.

Can you answer why handling charges for wheat while under the
CWB control were much higher than open market crops?

Any idea why Canadian and US prices for new crop are priced
within pennies of each other? In your opinion do you think trucks
will be heading south to the US?

When will farmers start 'bidding the price down'? Do you or Ken
have a timeline for this?

Why did the new crop wheat market follow the exchange price so
closely? Why did the CWB have a basis and pricing that did not
follow the markets?

These are just a few of my questions.

[bucket]

chuckchuck

Let's talk in march/april when those crush plant finally realize they are going to run out of canola.

If they drop the price too much the chinese come in and buy the raw product.

[charliep]

The answer to your question is no. The canola
industry is competitive with all members of the
supply chain profitable including farmers. The
canola industry will hit the Canola Council strategic
target of 15 million tonnes by 2015. Canola is the
most profitable crop in farmers rotations and will
stay that way in the future.

Can you demonstrate this level of success by wheat?
What has happened in wheat that is new, creative
and opening up new sources of demand?

chuckChuck - On the technical side, are margins
referred to theoretical board crush margins based
on futures market values or actual values based on
canola seed pricess and actual canola oil/meal
values. Given the volumes of oil and meal that are
moving to China, I would suggest a board crush
margin is not a fair representation of actual
profitability. Like the CWB, crushers will price
differentiation their product sales in different
markets. Do you disagree?

[charliep]

A question back at you chuckChuck. The Canadian
National Millers Association still supports the Canadian
Wheat Board/single desk sellling (heard a similar
theme by this groups within the last 3 weeks). Can
you help me understand why? Do you have a handle
on profitability of flour mills in Canada? Is this margin
excessive in your opinion?

[craig]

Chuck Chuck
Do you have the same concerns when crush margins are really poor. I visited a canola crusher on Thursday and they are running 24 hours a day 7 days a week probably because of the margins. Their plant is old and needs improvement and upgrades. Good margins encourage investment just as it does encourage building more crush capacity. Crushing capacity tends to be more stable than export as there is a need to keep plants running to pay for them. Interesting it could be asked by consumers that aren't farmers making excess profits on growing canola and driving the price of food too high. If farmers think crush margins are really good then maybe they should invest in a crushing facility. They just need to remember that while they are good today they might not be in the future.

[charliep]

Actually should copy the actual question you asked
and respond.

Your question - Are the $129 crush margins
justified or excess profit in an uncompetitive
market?

Don't care. Your measures are a poor indicatior of
profibability in a crush plant. Even if true, still
won't care - profitability in the entire supply chain
is a good thing. Nothing stopping farmers from
investing with bio diesel plants using lower grade
canola likely the best alternative. Mandates are not
being met in North America.

[blackpowder]

You don't have to believe an idea or concept to understand it. And vice versa.
Most of us have a concept we don't 'get' or believe. Merry Xmas chuckchuck.

[ajl]

There is also the effect of China's
tariffs that favour the importation of
soybeans over canola seed. This has the
effect of reducing the canola price in
Canada relative to beans even though the
components (oil and meal) are more
valuable for canola.

[furrowtickler]

ajl has the right response. Also, still alot of canola still being pushed into market keeping margins high (hot harvest - warm canola needs a home). I think when this exccess canola is done the bins will stay shut and crush margins will decrease as they will have to start to buy canola in the new year. The only way this will be derailed is the E/U crashing ... so who knows .