When compared to one year ago (brown bars versus grey bars), only four of the nine regions show a stronger basis -— the Peace region ($2.68/mt), northern Alberta ($2.54/mt), western Manitoba ($0.71/mt) and eastern Manitoba ($1.26/mt), with the year-over-year change in brackets.
Of the remaining five areas, basis has weakened from $0.60/mt to as much as $8.09/mt. Across the nine regions, basis has weakened an average of $1.58/mt.
This is hard to accept when one takes into account the fundamental outlooks from one year to the next. One year ago, Agriculture and Agri-Food Canada was forecasting a 3.5-million-metric-ton carryout, reflecting a stocks/use ratio of 18%. The most recent AAFC forecast has pegged 2020-21 stocks at 1.2 mmt, with the stocks/use ratio pegged at 5.8%. The current pace of movement points to the potential for an even tighter carryout, with exports running well-ahead of the forecast pace.
When compared to the three-year average (brown bars versus blue bars), current bids across all regions of the Prairies are weaker than average, ranging from $1.71/mt weaker than average in the Peace to as much as $16.16/mt weaker in southeast Saskatchewan, while averaging $9.10/mt weaker.
As mentioned in the past, the continued move higher in futures has done the heavy lifting to result generate attractive prices for sellers. Producers have delivered 9.6092 million metric tons into the licensed handling system, as of week 21 or Dec. 27, up 912,800 mt or 10.5% from the same period in 2019-20 that included data through week 22. Commercial stocks are reported at 1.6677 mmt, up 21.2% from the similar period last year and 35.4% above the three-year average.
As stated in the past, if one believes in the current estimates for 2020-21 supplies, old-crop marketing strategies should focus on capturing a narrower basis later in the crop year. The second half of the crop year, or February through July, may force buyers to work harder to attract grain onto the driveway.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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