Canola growers advised to moderate price expectations

LANGHAM, Sask. — Reduced acres, a dry spring and a cool summer will result in a small canola crop but don’t expect a price rally, say analysts.

Bruce Burnett, director of markets and weather with MarketsFarm, forecasts an average Canadian yield of 38.6 bushels per acre, which would be about two percent below the previous five-year average.

He estimates 20.36 million harvested acres, resulting in 17.8 million tonnes of production. That is two to three million tonnes below the annual production of the last few years.

“We’re going to see a pretty sharp drop off in canola supplies,” he told a group of farmers gathered in a tent at the Ag in Motion farm expo.

Uneven germination has resulted in crops growing at various stages of development in many fields across the Prairies.

In general, crops are about two weeks behind normal development and that has Burnett feeling nervous about canola prospects.

If there is an early frost, his yield estimate would drop to 34 bu. per acre.

“Under an extremely early frost scenario we’ll be lucky to do that. It’s probably going to be a sub-30 yield if that was to happen,” he said.

Burnett’s colleague, Mike Jubinville, said farmers shouldn’t expect a short canola crop to ignite the market.

Canola is testing the bottom end of its trading range with the November futures contract at about $450 per tonne.

“I don’t see that necessarily being fixed immediately without some new fundamental catalyst,” he said.

Production could well be down this year but total supply will still be burdensome due to the large old crop carryout.

One bullish factor is that soybean oil prices are trending higher and that is a good thing for a high-oil content crop like canola.

But that is more than offset by the dismal demand outlook for the crop in the wake of China backing away from Canadian canola.

Jubinville forecasts 1.8 million tonnes of exports to China in 2019-20 if there is no resolution to the ongoing political tensions. The volume could jump to 4.25 million tonnes if there is resolution.

He said China is not buying canola from Viterra and Richardson International but it is still sourcing product from companies like Cargill, Louis Dreyfus, Paterson Grain, and Parrish and Heimbecker.

Under the current demand scenario he forecasts a lackluster 9.85 million tonne total export program. That will keep canola trading in the range of $8.50 to $10 per bushel at a grain elevator in Saskatchewan.

He advised growers to jump on any opportunity to sell their canola at $10 per bu.

He expects 2019-20 canola carryout to climb to a record 4.4 million tonnes under the current China scenario. It would fall to a still burdensome three million tonnes if China returns to its normal buying patterns.

Burnett said the weather forecast calls for warmer temperatures for the end of July and early August.

“We need these warmer temperatures desperately to push the crop along,” he said.

July rain replenished soil moisture levels across a wide swath of the Prairies but it is still bone dry in northwestern Manitoba, southeastern Alberta and the top of the Peace Region.

“Crops in those areas are looking really, really bad right now,” said Burnett.

He said generally speaking, crops in the eastern Prairies are faring better than those in the west.

He advised growers to do lots of field scouting around mid-August to get a bead on what growth stage the crop is at because there could be a lot of green seed this year, even if the first frost arrives at the normal time, which is the first or second week of September.

“It really does impact your net returns significantly,” said Burnett.

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