If you believe posted canola prices right now, you’d get the impression that canola is moving into the system as expected, weighing on prices (basis). An average elevator bid of 61 under sends a message - "we have no trouble getting the canola we need". Posted basis levels have even dropped slightly by some in the last week or so. Deliveries into the system up to week 7 (2.3 mmt) is the third highest in the last 10 years.
So why am I hearing that Cargill at Camrose is paying $23 under - $27/tonne better than their posted basis (on their website)?
Cargill is not alone in this - they all do a version of the same thing. My problem is with the choice that companies are making.
- They have their “posted” bids behind password protected sites - only farmers, and often only customers - have access. Hard to call even these prices as “public”.
- They periodically put out a much better bid to even fewer farmers - MUCH LESS PUBLIC.
It makes me wonder, if their “posted” prices aren’t even public (because you need a password to see them), why bother? Why tell your customer base that your bid is 70 under when at the same time you’re telling a small subset of that base that you’re paying 23 under? Even if they text their whole customer base that they have a higher bid than what is on their website, why have the website price? Why have two prices?
?
Simply put, it's to their advantage to do it. And its at your cost. It's their thumb on the scale with contract overages, on target price contracts, futures first contracts and even deferred contracts. It affects spreads and even dampens enthusiasm for futures; a tightening basis is seen by traders as bullish - a weak basis tells traders they don't need to be bullish. Basis SHOULD be tightening - futures could be even higher if we got more bulls in the market.
Basis matters.
So why am I hearing that Cargill at Camrose is paying $23 under - $27/tonne better than their posted basis (on their website)?
Cargill is not alone in this - they all do a version of the same thing. My problem is with the choice that companies are making.
- They have their “posted” bids behind password protected sites - only farmers, and often only customers - have access. Hard to call even these prices as “public”.
- They periodically put out a much better bid to even fewer farmers - MUCH LESS PUBLIC.
It makes me wonder, if their “posted” prices aren’t even public (because you need a password to see them), why bother? Why tell your customer base that your bid is 70 under when at the same time you’re telling a small subset of that base that you’re paying 23 under? Even if they text their whole customer base that they have a higher bid than what is on their website, why have the website price? Why have two prices?
?
Simply put, it's to their advantage to do it. And its at your cost. It's their thumb on the scale with contract overages, on target price contracts, futures first contracts and even deferred contracts. It affects spreads and even dampens enthusiasm for futures; a tightening basis is seen by traders as bullish - a weak basis tells traders they don't need to be bullish. Basis SHOULD be tightening - futures could be even higher if we got more bulls in the market.
Basis matters.
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