Weak dollar, supply issues boost canola sales to Europe

Lower production in Australia and Ukraine gave Canadian canola a new market opportunity

Canola shipments to the European Union are way up, which is one of the reasons why ending stocks will be tight.

Canada shipped 328,600 tonnes of the oilseed to Western Europe in the first seven months of 2015-16 compared to zero for the same time a year ago.

“It’s not huge, but it’s a nice little bit of business that’s happening,” said Bruce Jowett, vice-president of market development with the Canola Council of Canada.

He believes it has something to do with production problems in Australia and Ukraine, the two traditional suppliers for the market.

Australia produced 3.1 million tonnes of canola last year, which was down 11 percent from the previous year. It was the third production decline in a row.

Ukraine’s production plummeted 23 percent to 1.7 million tonnes. The U.S. Department of Agriculture is forecasting that the country will export 1.4 million tonnes of rapeseed, down 29 percent from the previous year.

Jowett said Canadian canola is being used to make biodiesel.

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Derek Squair, president of Agri-Trend Marketing, thinks non-genetically modified canola is also being shipped to Europe for use in the food sector.

He believes the weak Canadian dollar played a big part in boosting sales to Europe, which typically imports two to three million tonnes of the crop.

Squair said increased sales of Canadian canola to Europe, Pakistan and India are helping mop up the second biggest crop in Canadian history.

“We’re seeing some crushers starting to get short on supply and bringing in contracts early, so that’s a solid sign that we’re going to have a very tight carryout,” he said.

Agri-Trend is forecasting 1.25 million tonnes of carryout, which is well below Agriculture Canada’s estimate of 1.85 million tonnes.

The canola futures price has rallied $44.80 a tonne since the low was established March 2, and basis has gone from $10 under to $10 over, resulting in a total price improvement of $64.80 in that time frame.

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The cash price is $11 per bushel, which is up more than $1 per bu. from the low of $9.85.

And that has all occurred despite the recent rally in the Canadian dollar.

“We’re seeing things getting really tight,” said Squair.

There could be continued strong demand out of Europe because of prospects for another disappointing Ukrainian crop.

The USDA is forecasting a 15 percent reduction in Ukraine’s rapeseed production in 2016-17 to 1.47 million tonnes because of high levels of winterkill. Ukraine’s ex-ports to the EU are expected to drop 21 percent to 950,000 tonnes.

The poor crop in Ukraine could be partially offset by a good one in Russia.

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The USDA is forecasting 1.25 million tonnes of production in 2016-17, a 25 percent increase over last year. However, Russia exports little rapeseed.