CNS Canada — Canola crush margins in Western Canada may be well off the highs seen last winter but are still very profitable for domestic processors as they hover around $100 per tonne above the futures.
Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring in to the equation.
As of Tuesday, the Canola Board Crush Margin calculated by ICE Futures Canada was at about $101 above the most active March contract.
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Current levels are right in line with the $20 range of recent weeks that has seen margins generally hover within $10 either side of $100.
At this time a year ago the margins worked out to about $135 per tonne above the futures, but eventually widened out to as much as $235 per tonne in February when logistics issues hampered rail movement across the Prairies.
While the current margins are a far cry from those highs, “at these levels, no matter what the other numbers are, the crushers are doing great,” said a canola trader.
“Anytime the crush margins are at $100, the crushers are doing OK,” he said, adding “if they weren’t doing OK they wouldn’t be doing 130,000-140,000 tonnes a week and they wouldn’t be building new crushing plants or expanding old ones.”
If average basis levels are widened out because the futures price is too high for the export market, he added, it will add to the profits for the crushers.
Crushers are able to move seed through their systems much faster than the line companies moving canola to Vancouver for export, which leads to reduced carrying charges.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
