The lower carry-out number is based on anticipation of stronger-than-expected canola exports in 2019-20 crop year
Agriculture Canada has reduced its estimate of canola carry-out stocks for the 2019-20 crop year by one million tonnes.
In its latest Outlook for Principal Field Crops report, released June 14, Agriculture Canada estimated canola carry-outs as of July 31, 2020, at 4.3 million tonnes, down a million tonnes from its previous estimate of 5.3 million, issued roughly a month earlier.
The lower carry-out number was based on the anticipation of stronger-than-expected canola exports in the 2019-20 crop year.
The June 14 report pegs total canola exports for the 2019-20 crop year at nine million tonnes, up from an estimate of eight million tonnes issued in mid-May.
Export estimates were adjusted upward, based on the current pace of canola exports, a seasonal weather market rally in early June 2019 and “expectations of a sharp rise in prevent plantings across key U.S. (soybean) growing regions following excessive rainfall and widespread flooding,” the report said.
Despite support for Canadian oilseed exports, Canadian exports are “expected to remain constrained, assuming no normalization of agricultural trade between China and Canada,” it added.
“The export forecast (for canola) remains highly uncertain and any change directly affects the carry-out stock estimate. Domestic crush is forecast steady at 9.25 million tonnes as the industry continues to operate at near full capacity.”
Based on a lower projected carry-out, Agriculture Canada’s estimated stocks-to-use ratio now stands at 23 percent.
While abnormally high, that number falls short of the record-setting 30 percent stocks-to-use ratio for canola established in 1988-89.
Canola prices, according to Agriculture Canada’s Market Analysis Group, are forecast to decrease slightly in 2019-20, to $460 to $500 per tonne, based on underlying support from a weak Canadian dollar.
Despite drought-related concerns across much of Western Canada, production estimates for new-crop Canadian canola, were unchanged in the June report at 18.9 million tonnes.
Fred Oleson, deputy director of Agriculture Canada’s market analysis group, said production estimates were not adjusted because it is early in the growing season and there is no new information regarding seeded acreage.
“We haven’t revised (our production estimates), basically because it’s so early in the crop year,” he said.
Current production estimates are based on an assumed seeded area of 21.3 million acres and average yields of roughly 33 bushels per acre.
Agriculture Canada bases its production estimates on seeded acreage figures contained in Statistics Canada’s seeding intention report, which can be viewed online at bit.ly/2ISPzur.
The most recent seeding intention report, released about two months ago, was based on a survey of more than 12,000 Canadian producers in early 2019.
Statistics Canada’s next seeded acreage report, due for release in late June, could show a reduction in estimated canola plantings, based on drought factors that were not fully recognized before seeding had commenced in Western Canada.
If seeded acreage estimates are lowered in late June, canola production estimates could be expected to drop even further, potentially resulting in a further reduction of estimated year-ending carry-out stocks.
“There’s been no new official information on seeded area since (April) … so we won’t adjust our seeding forecasts or estimates until the next Statistics Canada report comes out on June 26,” Oleson said.
At that time, there’s definitely a possibility that seeded area estimates and production estimates will be adjusted, he added.
“The Statistics Canada seeding intentions report was done at a time that was fairly early in the crop year and there were a number of political issues on the go,” Oleson said.
“It’s very hard to forecast how farmers are going to respond at this time.”