Canola carryout in 2019-20 could be almost double what Agriculture Canada forecasts if China remains out of the market, says a leading exporter.
Agriculture Canada predicts there will be 4.3 million tonnes of carryout in the upcoming crop year.
Chad Molesky, merchandizing manager for Viterra’s oilseed division, doesn’t think that is realistic.
“Without China that’s going to be way low. Way low,” he said.
“If there’s a dramatic reduction in China then certainly you can see that carryout near eight million tonnes.”
China would have to take at least three million tonnes of canola for the 4.3 million tonne carryout forecast to be realized and that doesn’t appear to be in the cards.
China bought a paltry 51,200 tonnes of Canadian canola in April 2019 compared to 472,300 tonnes the same month one year ago, according to the Canadian Grain Commission.
Molesky has heard unconfirmed rumours of a couple of boatloads recently traded to China but for the most part business has come to a halt.
“It’s just an odd couple of trades that filtered in,” he said.
He is finding some extra business in places like Pakistan, Bangladesh and the European Union but it is a drop in the bucket compared to the 4.8 million tonnes of Canadian canola China purchased in 2018.
“We’re not going to come anywhere close to making up what the Chinese marketplace would take in a year,” said Molesky.
Exports to the rest of the world would typically be in the six to seven million tonne range, which is a far cry from Agriculture Canada’s nine million tonne forecast for 2019-20.
One market where there will be extra business is the European Union.
Viterra is forecasting a 17 million tonne rapeseed harvest for the region, down sharply from the previous five-year average of 21.9 million tonnes.
That is very much in line with reports out of Europe. France’s ministry of agriculture is forecasting 3.8 million tonnes of production in that country, down 25 percent from the previous five-year average.
Molesky expects EU imports of Canadian canola to be just shy of 800,000 tonnes in 2018-19. Next year they could blossom to a record 1.3 million tonnes or even as high as two million tonnes if Australia’s crop falters.
Shipments to the EU’s biodiesel sector have to be accompanied by sustainability certificates.
Viterra is the industry leader in sustainability certification. Molesky said the company’s grower database has grown about 20 percent in the last four months as growers search for new markets for their canola.
In the past, the company focused on certifying growers in Manitoba and eastern Saskatchewan because most of the trade with Europe was happening out of Thunder Bay and Montreal.
But with the EU’s short crop and Canadian canola becoming more price competitive, there is starting to be a “flow of vessels” out of the West Coast.
That has Viterra wanting to certify growers in western Saskatchewan and Alberta. Molesky said it is a quick and easy process and the only reason a grower would be rejected is if they have cleared land.
In addition to growing demand in the EU, he forecasts an extra 200,000 tonnes of imports from each of Pakistan and Bangladesh.
Molesky isn’t forecasting any more business in established markets like Japan, Mexico and the United States because there are a lot of cheap U.S. soybeans around. That has been reflected in the level of new crop business.
“They’re getting coverage and they’re buying their historical volumes,” he said.
Agriculture Canada forecasts 9.3 million tonnes of exports and 3.9 million tonnes of carryout in 2018-19.
Molesky thinks exports will struggle to get to nine million tonnes and carryout will be higher than four million tonnes.