Outrageous basis levels and crush margins

[AdamSmith]

Exactamundo, Tom.

[rain]

We did a bunch of 6 under spot delivery canola yesterday delivered calgary region

[melvill]

Yes, canola basis levels are generally lousy! But, according to rain, there are some deals around out there. Here's the thing, though. Basis, in commodities that have basis, is a message from the grain trade of how badly they want a product. A wide or weak or horrible basis - whatever we call it - is the trade saying they really don't want something regardless of what the futures are doing.

In the canola market right now, it isn't just the grain trade that really doesn't want canola very badly. Foreign importers aren't that anxious to buy canola either. How do we know?

According to info I receive, Vancouver cash basis - what exporters have been able to get from buyers - have been less than $10 to $15/tonne over Nov futures. Normally the Vancouver cash market is $25 - $30/tonne over. The awful Vancouver cash basis explains the awful basis levels in the country.

[AdamSmith]

melvill,

Shouldn't we then be asking why is the demand for Canadian Canola so poor? and demand for all western Canadian grain for that matter, so poor?

We once were considered a reliable supplier and the go to place for Canola. But that's no longer the case.

Why has Canada become so uncompetitive and unatractive?

Yes, the wide basis is the market place saying we don't want your grain but WHY DON'T THEY WANT OUR GRAIN???

The board price for canola and bean oil suggest there is good demand in the world for oil and oilseeds yet the basis tells me that buyers will buy anyplace ahead of western Canada.

As I see it the federal government,the grain industry and farmers are drifting along in denial that there is something fundementally wrong with the western Canadian grain industry.

History suggests that only when a catastrophic collapse occurs will any one pay any attention.

[charliep]

Any thoughts on what should happen differently.

My analogy is to fishing. Your fish finder tells you there are fish down there but nothing seems to be biting. What you are waiting for is the big to bite the hook and run.

The issue today is to put some Chinese canola business on the books. Why aren't they buying - don't know. What I do know is when they do come in, they will buy bigger volumes. More shipping opportunity based on sales will narrow basis. Will China bite - again, don't know. I just know what to look for when it happens.

The signal now from the basis side is to be patient on cash sales (unless you have basis contracts at tighter levels booked). A higher futures market should suggest a selling contracts in Jan./Mar. Depending on your strategy, experience, etc., there are lots of other tools that a farmer can use.