Canola Market – What To Do?8 months ago -
Upcoming market considerations for canola producers following China’s import restrictions imposed in March.
“Canola producers are well aware of those import restrictions,” says Neil Blue, provincial crop market analyst with Alberta Agriculture and Forestry.
According to the Canadian Grain Commission (CGC), to mid-July of the 2018-19 crop year, canola deliveries to the licensed Canadian handling system totaled 17.6 million tonnes, down about 780,000 tonnes from mid-July 2018. CGC recorded canola exports totaled 8.9 million tonnes near crop year-end, down one million tonnes from last July.
He says that export destination data are less current. “China, after a stronger start to importing Canadian canola in crop year 2018-19, had imported 560,000 tonnes less canola seed from Canada to the end of May than in the same 10-month period last crop year. Lower exports of Canadian canola seed to Mexico, Japan and the United States were also recorded.”
“A bright spot is domestic usage,” he adds. “CGC reports to July 14 that domestic use totaled 9.1 million tonnes compared to 8.9 million tonnes to mid-July 2018. A large amount of high green seed count canola was harvested last year. Much of that seed sold for feed or to small biodiesel plants, and most of that not recorded in CGC statistics.”
As for the canola inventory situation, Blue says that there is little doubt that canola seed carryover as of August 1, 2019 is record high.
“The 2019 Canadian canola acreage is lower at just under 21 million acres, according to the June Statistics Canada survey. Assuming average yields, lower exports and similar crush usage for crop year 2019-20, Canadian canola carryover is forecast similar to the 3.5 to 4 million tonnes estimated for July 31, 2019.”
He adds that although canola carryover will be record-high, crop storage will not likely be an issue for most farmers this fall.
“That is due to exports of wheat, durum, barley and lentils being significantly higher during 2018-19, more than offsetting the lower canola exports and lower overall domestic usage.”
With canola prices, Blue notes that the price of canola eroded in December 2018, following lower forecasted soy complex prices and continued increases to world inventories of soybeans and vegetable oil.
“In addition, the loss of hogs from African swine fever is reducing feed demand in Asia. However, some farmers did forward price new crop canola early on at higher prices via deferred delivery contracts or by using futures or options.”
“During June and July, there were bids of more than $10 per bushel for No. 1 canola – not as high as wished but still historically good. Off-grade No. 3 and sample canola is marketable, although discounted to a range of $5 to $9 per bushel, quality dependant. Canola basis levels have varied widely, with some buyers bidding 50 cents a bushel more than nearby competition. Some line elevator companies have offered basis ‘specials,’ resulting in prices near $10 per bushel.”
He adds that a rebound to higher canola prices is not in the near term forecast without resolution of the trade issue with China.
“However, the marketing message remains – know the grade of your product and shop widely for the best pricing opportunities.”
Source: Alberta Agriculture and Forestry