The chart at right shows the trend in a calculated canola crush margin index, which has remained range-bound since mid-July, ranging from $73.84/metric ton over the nearby future
for the week of July 17 to a low of $51.46/mt over the nearby future for the week of Aug. 14. Today’s close was $59.47/mt, which is in the lower one-half of the range traded.
The calculation is largely based on the formula used by the Canadian Oilseeds Processors Association, which is described as follows:
Canola Board Crush Margin in CAD/metric tons = ((BO*22.04623* Noon Rate*.40) + (SM*1.103*Noon Rate*.6*.75)) – ICE Canola seed future
(Where: BO = soybean oil future, SM = soymeal future and Noon Rate = daily report from the Bank of Canada)
Since the recent high reached of $131.74/mt for the week of Jan. 9, the return has been challenged by weakness in soybean oil futures, soymeal futures along with a higher Canadian dollar trade. For example, the continuous soybean oil chart points to a drop of 6.7% from the close the week of Jan. 9 to today’s close, soybean has fallen by 7.7% while the Canadian dollar has increased by 5.2%, all three factors negatively affecting potential crush margins. One potential distortion to the formula is the contribution of oil that is pegged at 40%, while the Canadian Grain Commission’s Preliminary quality of western Canadian canola 2017 points to a mean oil content of 44.8% across all grades, although this represents early results and is far from final.
The current index calculated is just 52% of the level reported this time last year while also below the three-year average for this week at $90.86/mt. Despite this, the latest Canadian Oilseed Processors Association crush data as of Sept. 27 shows the weekly crush at 184,831 metric tons, up 8.9% from the previous week and 14.6% higher than the previous four-week moving average. Despite weaker crush margins, the cumulative crush is just 63,617 metric tons behind the record pace set in the 2016/17 crop year.
Producers continue to deliver seed at a record pace, with the most recent Week 8 data showing 2.9346 million metric tons delivered into the licensed handling system, including crushers, which is 7.6% or 206,500 metric tons ahead of the pace set last year as of Sept. 24 data.
