Canola Prices vs. Soybeans @ parity !

[boarderbloke]

If the demand for veggie oil is the main factor in driving canola and beans, and canola has a 2 to 1 yield of oil vs. beans, why isn't the oil yield better reflected in the WCE futures price for canloa? At 50 lbs/bus, and 44% oil, crushed canola should yield 22lbs of oil, and 28 lbs of meal. On ROB-TV tonight the Can$ was at 99.09, so lets just call it par for easy math. Soyoil is around $0.40/lb, and we all know that canola is supposed to have a higher value due to health concerns! But say we just use $0.40 x the 22 lbs of canola oil, should give us $8.80/bus. Soymeal is around $275.00/ton or $0.1375/lb. So, $0.1375 x the 28 lbs of canola meal, should give us another $3.85/bus. $8.80 plus $3.85 is $12.65 on my calculator!!! Canola is sitting around $10.00/bus nearby, so where's the other $2.65 ?? I say lock up those bins boys, remember they can double up the price of any raw commodity you grow, and it won't make much of a true cost increase. Most all of the increased costs the consumer is facing now, are transportation costs due to higher fuel cost, now is not the time to feel guilty for making a profit, just remember a few of the bad years, and/or filling out some gov't program. Carl

[charliep]

Just would note I make an adjustment for the protein. Canola is about 36 % protein versus soybeans at around 46 %. Canola also has lower energy than soybean and is perhaps more comparable these days to dried distillers. DDG's (corn) are extremely cheap these - even in Alberta. I adjust the protein value by a factor of .7 to reflect differences in nutrient value between soymeal and canola meal.

Also need to note you are using futures prices and not cash but agree with your comment that canola is likely sold at a premium to soyoil in many markets.

The crush margin is posted as a chart on the WCE website.

http://www.wce.ca/ContractsMarketInfo/charts.htm

[charliep]

Canadian Oilseed Processors Association also posts weekly canola and soybean crush margins.

http://dds.exg.ca/app2/DDS/Default.aspx

[Zaphod]

One other note to remember. The crushers don't process the seed for nothing. They've got to pay their bills and take a profit margin too. I don't know whether that margin is big or small right now, but some amount needs to be figured in.

[charliep]

Lee tested my link to the COPA web site/found out it didn/t work. Here is the COPA link. See COPA weekly and monthly links along the left side.

http://www.copaonline.net/

The formula is also available for the WCE crush marging calculation as well. The use 75 % for the value of canola meal relative to soymeal.

http://www.wce.ca/DeliveriesCashMarket.aspx?first=canolaboardcrushma rgin

[boarderbloke]

Gentlemen, I didn't post the above to dwell on crush margins, or whether we're getting paid anything for protein in our "feeds", those can both be left for another day (something indefinably worth talking about), but what I wanted to was discuss whether at par, a bus of Soybeans is worth the same as a bus of Canola?

[charliep]

Fair enough. In answering your questions about relative value, I would use the same process you have. The only change is not to deal in tonnes but rather than bushels. A tonne of soybeans is worth $367/tonne (60 lb/bu) versus canola at $440/tonne (50 lb/bu).

From the COPA web, the November canola board crush margin is $70/tonne (approximately) versus US soybeans board crush margin of somewhere between 50 and 60 cents/bushel ($20/tonne). Have to realize these are calculated based on futures prices and these will not reflect cash values for canola oil and meal exactly. This would be a point to start from.

[chaffmeister]

Did some calculations - based on:

- beans at a buck under the Nov
- canola at $25 under the Nov
- cash soyoil at 150 under Oct futures
- cash soymeal at 25 under Oct futures
- cash canola oil at 50 under (assuming the typical penny per pound premium over soy)
- canola meal at 100 under (so I'm told by a crusher-buddy of mine)

I can't guarantee these prices but this is what it looks like.

Using these numbers, crushing a bushel of beans gets you $9.96 worth of products. With beans at $8.70/bu this leads to a crush margin of $1.26.

Crushing a bushel of canola gets you $10.84 worth of products. With canola at $9.39/bu this leads to a crush margin of $1.45.

So - with the currencies at parity, are beans and canola at parity? I guess the answer is no. It's been a while since I took a long hard look at this stuff but it sure seems like an oil-led crush which would favour canola (higher oil content) and that's what is showing up here - canola products (per bushel of canola) are worth about a buck a bushel more than what you get from a bushel of soybeans.