This past winter, we already saw canola basis levels improve by $10-20/t on a widespread basis, in anticipation of the rise in domestic demand that has come with the new crush plants in Yorkton. Now, since the weather scare has been rallying the market in recent weeks, basis levels have continued to improve, even amidst a sizable increase in futures prices.
Typically, futures and the basis are inversely related. Speculators and other overly-emotional traders can cause the futures to overshoot a relevant valuation for the crop, which an opposing move in the basis can correct to bring the cash price back into line with what buyers and sellers can agree on.
While volatile, and variable across different regions, there are spots in western Canada that are still seeing the basis strengthen. Seeing it offered in positive territory for fall delivery is rare if not unheard of in the past 5-10 years. One wonders how long this trend can be sustained.
This must not be a fun time to be a newly-opened crush plant manager in Saskatchewan. The local crop size is dwindling fast, not much is happening in vegoil markets, farmers are getting bullish and it’s all happening right as they hoped to ramp up capacity.