(Resource News International) — Cash bids for canola in Western Canada have been holding fairly steady, although basis levels have begun to firm to some degree.
The fluctuation in cash bids have been linked to export demand, with much of the strength from the grain companies being tied to the need to cover nearby commitments, said Ron Frost, president of Frost Forecasting Corp. in Calgary.
“As for the firming of the basis levels, particularly near Yorkton, Sask., the growing competition between domestic crushers and exporters has begun,” Frost said.
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Frost indicated that the canola export sector is about to receive some very stiff competition from the rapidly expanding crush capacity in Canada, and that this competition has already begun in some areas.
“Positive basis levels may become common for periods where there is competition between crushers and exporters,” he said. “However, producers should be able to see levels of $25 per tonne above the ‘traditional’ basis levels throughout the 2010-11 season.”
The expanding demand from the domestic processors was seen taking place over the next 10 to 12 months, with extra crush capacity slowly coming on line during that time frame, Frost said.
He also pointed out that even with the uncertainty surrounding Canadian canola exports to China, demand for Canadian canola from other locations will continue to improve.
“Not only is Canada’s mandate for biofuels scheduled to kick in soon, the U.S. also will be looking for higher oil-bearing crops in order to meet biofuel requirements,” the analyst speculated, noting that Canadian canola oil fits those needs quite nicely.
Frost said Canada’s canola exports to China would likely only be in the 1.5 million-tonne area during the 2009-10 crop year, but other countries such as the UAE, Pakistan, Turkey and Mexico are all expected to increase canola imports this season, making up for some of China’s loss.
Cash bids for canola, delivered to the elevator, as per Prairie Ag Hotwire data, in Saskatchewan currently range from $7.87 to $8.52 a bushel, in Manitoba from $8.43 to $8.52 and in Alberta from $7.77 to $9.31.
At the end of October, cash bids for canola in Saskatchewan, based on Prairie Ag Hotwire figures, ranged from $7.96 to $8.48 a bushel, in Manitoba from $8.11 to $8.66 and in Alberta from $8.24 to $8.91 a bushel.
