Canola basis levels

[charliep]

I am starting to hear a lot better offers on new crop basis levels. Has anyone been going any shopping for basis contracts? What new crop basis levels are being offered? How do they compare to other years? If you were to make a seeding decision today, how would your canola acres increase or decrease?

[danm]

Here in Manitoba basis is at $28-30 so far. This gave us over 6.00 last week,but am holding off for better days, any suggestions in when to pull trigger. I would say canola is staying where it is for acres,since fertilizer is going nuts! I am leaning towards more flax any thoughts? when should I buy back my old crop to try to recapture some of that low priced stuff I sold last fall?

[charliep]

How does a $28 to $30 basis compare to normal? Picking on my home community around Calgary, grain companies normally (not there yet) come out with a new crop canola basis in the $5 to $8 under the Nov. WCE contract (Oct. delivery) this time of year. In looking over time, this is a good basis/other things equal and should be acted on. Normal basis is in the $10 to $15/t under. Ugly/bad basis is $20 under plus (common this last fall).

I continue to encourage patience on any canola re-ownership strategies/enjoy the money I banked last fall (I hate to take a bad price and make it worst). The world has to deal with the massive supplies of vegoil (higher palm oil production and soybean crush driven by meal demand) before soyoil/canola can move higher. Canola's trading range is likely to stay in the $250 to $270/t range basis the nearby contract with a strong likelihood the market will remain one that looses carry (May contract range comes down to current March one over the next month). I am a seller at the top end if I still have old crop inventory unpriced.

If you are interested in strategies, an interesting idea is to start looking at buying Nov. canola calls. They are expensive (Nov 300 - $10, Nov 310 - $7.50 and Nov 320 - $5) but you have to remember they have lots of time in them so the writer of the call option will want a high premium. The strategy is to buy calls when the market is down/volatility is low (very quiet market). When the market rallies into the $290 to $300/t area basis Nov. futures, you can pull the trigger on the cash/futures side knowing you have the call in place in case the market goes higher this summer. Any other thoughts out there as to whether this strategy has merit?

Flaxseed remains an interesting wild card we will have to watch. In particular, we will have to pay attention to how far European acres come down this spring. Stay tuned.

[TOM4CWB]

I see that basis levels for fall 2001 have returned to reasonable levels, although I am told not for long!

Cargil, Agpro at about-$12 under central ALTA.

I think this is OK and beleive they are trying to buy Canola Acres!

This is great, and the way the market should work.

[charliep]

A long ways down the thread (not likely to get read) but worth re-highlighting my/Tom's comment. I have started to hear of some pretty good basis for both old and new crop. A good time to go on alert/book some volumes - particularly if you have major cash needs in the fall. If you have old crop canola still left to crop and need the cash before seeding, it is also a good time to price some more old crop. Record south American bean plus higher US beans plus increasing palm oil production equals continued pressure on prices. New crop should be treated as an alert but I might be a little more patient.

Charlie