Agriculture Canada sees declining canola stocks

Agriculture Canada has lowered its forecast for Canadian canola year-end stocks to 950,000 tonnes from 1.45 million and has pegged the 2015-16 carryout at a very tight 500,000 tonnes.

Year-end stocks of less than a million tonnes are tight and provide good support for the canola market.

However, canola prices are determined in the broader context of oilseed values, and they are under pressure because of excellent growing conditions in the U.S. Midwest and strong competition from South American soybeans.

Nevertheless, a tight canola stocks situation will help keep the yellow flowered crop in a premium price position compared to other oilseeds.

Agriculture Canada left its 2014-15 export and domestic crush numbers unchanged at 9.2 million tonnes and 7.2 million, respectively.

It increased its allocation for feed, waste and dockage to 667,000 tonnes, up from 142,000 in the previous month’s report. That is a lot more in that category than is normal and might be a bit of a fudge factor.

The Canadian Grain Commission said canola exports are 6.845 million tonnes as of May 17, but the CGC data does not catch all exports. By comparing CGC weekly data and Statistics Canada’s monthly data, it looks like CGC data catches 93.5 percent of all canola exports.

If that is correct, then total canola exports stand at 7.32 million tonnes as of May 17, or an average of 178,561 tonnes a week.

If exports keep up with that pace for the remaining 11 weeks of the crop year, then Agriculture Canada’s forecast of 9.2 tonnes of exports will be correct.

And even with the current weakness in the canola crush margin, the crush forecast of 7.2 million tonnes also appears to be appropriate.

So Agriculture Canada’s ending stocks number of less than a million tonnes appears easily attainable.

The department’s forecast for 2015-16 ending stocks is an even tighter 500,000 tonnes.

The department’s new crop supply and demand is based on the March seeding intentions report, which said farmers planned to seed 19.42 million acres and produce a crop of 14.9 million tonnes.

However, most analysts think the final number will be higher, and the historical experience is that the final seeded area is five percent higher than the spring intentions report.

It would mean another million seeded acres and a production number closer to 15.7 million tonne, or about 800,000 tonnes more than Agriculture Canada’s forecast.

However, that does not mean the ending stocks forecast is wrong by a similar amount.

Agriculture Canada lowered its 2015-16 export forecast to eight million tonnes from 9.2 million this year, largely because if it kept exports high, it would have driven stocks down to an impossibly small amount.

If there is more canola available, more will be exported. As well, it is reasonable to expect another carry-out of less than a million tonnes and maybe even as tight as the 500,000 tonnes that Agriculture Canada has forecast.


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