Canola exporters appear to offer discounts to fill gap

Exporters are finding alternative buyers for canola not going to China this crop year, but some importers pay much less than others to get the product.

We’ve reported that European countries are buying more because of reduced production there and bargain hunters such as Pakistan and the United Arab Emirates are increasing imports.

There isn’t a one-for-one offset though. The export pace is falling behind last crop year, with 3.068 million tonnes shipped to Dec. 1, down from 3.359 shipped at the same point last year.

Still, exporters are doing better than I would have expected to fill the giant hole left by China’s restrictions.

But it appears some customers need a significant discount to get their business.

We don’t have access to actual sale prices but we can get an idea from Statistics Canada’s export trade monthly reports.

The numbers for October were released last week and they show 686,126 tonnes of canola exported in the month at a total value of $341.14 million, or an average value of $497 per tonne.

The month’s top 10 buyers by volume ranged from the leader, Japan, at 188,889 tonnes to the smallest, the United States, at 7,774 tonnes.

By value-per-tonne sold, Portugal led the way with its 46,698 tonnes at $601 per tonne.

The U.S. was also a high value buyer with its purchases, having a value of $557 per tonne.

Japan’s business was also higher than the overall average, at $508 per tonne.

China took 168,117 tonnes in the month making it the second-largest buyer, but that amount paled by comparison to the 633,882 tonnes it took last year in the same month. That was before the falling out between the two countries in December over Canada arresting Meng Wanzhou, Huawei chief financial officer and daughter of the company’s founder, on an American arrest warrant.

This October, the sales to China were at an average value of $475 per tonne, $22 less than the average for all sales.

Rounding out the buyers this October were Mexico, Pakistan, Germany, France, Belgium and the United Arab Emirates.

Germany’s sales value was $505, France $492, Mexico $491 and Pakistan $485,

Of the bunch, the UAE and Belgium had the lowest value sales. The UAE took 33,745 tonnes at an average value of only $442 per tonne, or $55 less than the average.

Belgium took 19,523 tonnes at a value of only $433 per tonne, or $64 less than the average.

The Statistics Canada data does not have details of the sales contracts but it would seem that to attract UAE and Belgium business, a steep discount was needed. I assume these sales still somehow netted a profit for the export seller but it would require a very sharp pencil.

Cash prices for No. 1 canola in Canada since September began have ranged roughly from $420 to $440 per tonne.

As I’ve already noted, exports are falling behind last year’s pace, but the absent demand is more than offset by the domestic crushing industry, which is having a record year.

Domestic use of canola in the crop year to Dec. 1 is 3.482 million tonnes, up 22 percent or 633,600 tonnes over the same point last year, says Canadian Grain Commission statistics. That is an impressive increase considering that no new oil crush plants have opened in the last year.

Global vegetable oil supplies are on the tight side and crushers are enjoying healthy crush margins.

Thanks to the record domestic demand, total domestic and export demand for canola this year is stronger than it was last year at the same point. A total of 6.55 million tonnes have disappeared, up from 6.21 million last year.

The week-long rail strike might trim the export pace further for a short period but we should be able to catch up if we don’t have severe winter weather stalling rail traffic.

Another item of note in the export market is the strong durum movement.

To Dec. 1, durum exports stand at 1.7 million tonnes, up from one million tonnes at the same point last crop year and 1.3 million the previous year.

The biggest buyers this crop year have been Morocco, Turkey and Italy.

Again, the Statistics Canada data does not give the grade breakdown of the sales. The average value of all durum exports in October was about $317 per tonne.

Sales to Morocco were valued at $342 per tonne, stronger than the average for all sales.

Sales to Italy were valued at $323 per tonne while sales to Turkey were valued at $305 per tonne.

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