Loonie pullback supports canola crush and exports

The prices of Canadian agricultural products are supported this week by the falling loonie.

It peaked at almost US80 cents last week but as of May 9 had dipped below 77 cents.

Reviving worries about the slower pace of China’s economy has put the brakes on the commodity rally this year that had lifted the value of the loonie through April.

The weaker loonie this week will help support the pace of canola crush and exports, as well as the exports of other crops.

The crush pace has sagged in recent weeks as the loonie rallied.

The accumulated crush is still at a record pace and well ahead of last year at the same time, but in the past two weeks the industry was running at less than 65 percent of capacity, well off the average pace for the year of 82 percent, according to figures from the Canadian Oilseed Processors Association.

The average crush of the past two weeks was 121,080 tonnes, well down from the average of 158,402 for the first 39 weeks of the crop year.

To match Agriculture Canada’s forecast of 8.1 million tonnes of domestic crush for the year, processors will have to crush at least an average of 147,868 tonnes per week for the remaining 13 weeks of the crop year.

On the export front, weekly canola exports in week 39 were an impressive 292,300 tonnes, roaring back from two weeks of lackluster performance.

Weekly exports must average about 181,000 tonnes for the remaining 13 weeks of the crop year to match Agriculture Canada’s forecast of 10 million tonnes.

Statistics Canada’s March 31 crop stocks report last week pegged canola supply 7.49 million tonnes as of March 31, which was in the ballpark of what the trade expected.

The market expects year-end stocks to be fairly tight and that assumption will be supported if the loonie stays around 77 cents and does not make another run at 80 cents.

Rain this week in Saskatchewan and Manitoba has lessened drought worries but Alberta got little rain.

As this column was written, there was the possibility for a touch of frost in many areas this week but the moisture might lessen the impact on newly emerging canola.

Turning to wheat, Statistics Canada pegged wheat and durum stocks on March 31 at 13.79 million tonnes, the smallest amount on that date since 2008.

Thanks to the generally low loonie this year Canadian wheat has been flying out of the country and the export pipeline by the end of the year is expected to be practically dry.

But that won’t help wheat prices much. Industry tours of Kansas and Oklahoma last week showed the potential for bumper hard red winter wheat yields.

There is good potential for a larger U.S. wheat harvest this year, even though acreage declined.

American farmers will start cutting the winter wheat crop in a few weeks and that will put more pressure on the wheat market.

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