Canola mar­ket – what to do?

Prairie Post (East Edition) - - NEWS - Al­berta Agri­cul­ture

Con­sid­er­a­tions for canola pro­duc­ers fol­low­ing China’s im­port re­stric­tions im­posed in March have to be dis­con­cert­ing and there is some angst.

“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 to­talled 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 record­high, 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.”

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