roll canola March basis or not?

[jdepape]

Futures are relevant to both buyers and sellers. A common mis-step is thinking that graincos buy from farmers at some basis and then sell that grain at futures price.

Right now, average canola basis in the prairies for spot delivery is about 30 under. Average price in Vancouver (track Vancouver - meaning the price before it goes through a terminal) is quoted as 40 over. Therefore the spread between the country and the port is about $70.

As you said, there are times when the country price is more like 10 over - when that happens, the Vancouver price is most likely in the area of 50 or 60 over.

Because of the way futures markets work, they remain relevant and the basis reflects more local pricing impacts. So using futures to hedge works to remove most of the price risk inherent in trading grain.

[mcdon]

My post re basis as a component of price wasn't meant to split hairs. There is obviously a wide range of grain marketing experience amongst readers and to depict basis as a "price"In could be confusing for those with limited experience. In my 35 years of grain marketing I have never heard of basis being referred to as a "price".
Simply put, basis is a component of farm gate price where,

Farm Gate Price = futures price - basis

In theory it is used by grain companies/end users to regulate the flow of inventory much the same way the CWB used quotas to regulate flow. Its effectiveness depends on a strong correlation between cash prices and futures. Where there is a poor correlation e.g. oats last year, basis levels become less effective as a tool for merchants.