Soybean glut won’t hurt canola demand

CALGARY — Healthy crush margins in Canada, strong Chinese demand for oilseeds and increased European demand for canola will offset the downward pressure on canola values by a burdensome soybean carryover, said Marlene Boersch of Mercantile Consulting Venture.

China is set to import 86 million tonnes of soybeans and 4.5 million tonnes of rapeseed this year, she said.

“That is a very good demand situation on top of the normal buyers that we have,” Boersch said during her presentation at the Farm Forum Event in Calgary Dec. 7.

“On canola, I think we have very strong export demand. Right now values of canola products relative to soybean products are priced very advantageously. So I see more export demand coming.”

Canola exports to the European Union picked up last year because of production problems in the bloc and in Ukraine.

“They (EU) have a very important biodiesel market they have to source for, and in terms of exports of canola, we are very important, and they had to come to Canada to make up for some of those shortfalls,” she said.

“We will have some competition from Australia, but again we have already sold about half a million tonnes to Europe and I think we will sell more.”

She said any problems with the Eastern European winter rapeseed crop will support canola because growers in the region are unlikely to reseed with spring canola.

Vegetable oil values are driving the oilseed market, more so than meal.

“Canola has a higher oil content than soybeans. Given current prices we compare very favourably and that’s why we think China will continue to be interested in buying canola,” she said.

Crush demand is strong in Canada because crusher margins are excellent.

“We have some good oil forward sales into China because of the dockage problem, so crushers have been keen to work to capacity, which they have been doing. So the two demand components are working very well right now,” Boersch said.

“Crush margins for Canadian crushers are outstanding with board crush as high as $160 a tonne.”

She said Canadian crushers will process a record nine million tonnes this year.

Canadian canola acreage is expected to remain about the same as last year at 20.5 million, so it might be a good time to lock in some new crop canola contracts that are available, she said.

However, growers sitting on old crop canola may want to hold sales for a few months.

“I don’t think I would sell a lot of current crop canola right now; I would wait a little bit, to see that demand really come to the table,” Boersch said.

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