Exports eat through wheat, canola stocks

The weak loonie is considered to be the main reason for the brisk movement of canola to overseas markets

Canadian farmers are moving their crops at a breakneck pace, blowing past the rate of recent years.

Producers delivered almost 10 million tonnes of wheat, excluding durum, between Aug. 1 and Jan. 31, according to the Canadian Grain Commission.

Wheat exports were listed at 8.3 million tonnes in the same period, up from 8.1 million tonnes the previous year and well above the five-year average 6.8 million tonnes.

Canola is also moving briskly.

Exports during the first six months of the crop year were 4.8 million tonnes, up from 4.2 million last year and well above the five-year average of 3.7 million tonnes.

Domestic canola consumption in the same period was nearly 4.1 million tonnes, up 12 percent.

To feed this demand, Canadian producers delivered more than nine million tonnes of canola in the first half of the crop year, also up 12 percent from the same time last year.

Durum exports were 2.33 million tonnes, down from 2.72 million tonnes in the same period last year but still on par with the five-year average.

Rapid disappearance of Canadian canola supply is the result of several factors, most notably a weak Canadian dollar relative to other currencies.

“Chinese demand has been decent. It’s been good,” said Derek Squair, president of Agri-Trend Marketing.

“The dollar is really helping as well, so both of those factors are helping a lot.”

Squair said the usual markets of China, Pakistan, Mexico and the United States have driven foreign demand for Canadian canola.

Demand for oil as opposed to meal is another factor.

“The oil market is really driving the market more than meal, so we are seeing a little bit more canola than soybeans going into the crushing markets because of the higher oil to meal ratio, he said.”

Domestic consumption numbers are also strong this year, largely because of improved crush margins and additional crush capacity that has come online at Camrose and in Eastern Canada.

Steady disappearance could result in ending stocks that are slightly tighter than previously projected.

“We’re ahead of schedule here in the export side, so the demand’s been stronger than what we’ve seen for the last couple of years,” Squair said.

“We also feel that Statistics Canada’s (production) numbers are high at 17 million plus tonnes.… We’re thinking it’s more like 15.7 or 15.8 million. Our projections are a little bit lower than theirs, so our supply and demand numbers are obviously a lot tighter.”

Agriculture Canada on Feb. 16 forecast year end stocks at 1.75 million tonnes, down from 2.3 million the previous year.

Agri-Trend’s projection for the year is closer to 1.5 million.

“We’re feeling that by the end of the year, we should see some tightening of stocks: nothing too (significant) but a lot tighter than what we’ve seen over the past two years,” he said.

Brisk wheat exports in the first half of the crop year are the result of the low Canadian dollar, slow movement of U.S. stocks, a fluid Canadian rail transportation system, record low ocean freight rates and increased competition in the Canadian grain handling sector.

“When it comes to wheat, I think we’ve done a very god job of moving our crop in the past few years,” said Cam Dahl, president of Cereals Canada.

“Our carryouts are quite low, and they’re going to be quite good in comparison with the U.S.,” Dahl said.

Canada’s ending stocks of wheat will drop nearly 3.1 million tonnes this year.

“That represents a really significant opportunity for producers to move their product and get a return,” Dahl said.

brian.cross@producer.com

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