Strong sales to Europe through the port of Thunder Bay will be particularly good news for growers on eastern Prairies
One of Canada’s top canola customers in 2019-20 is expected to be a major player again this year and that should result in elevated basis levels in the eastern Prairies, says an analyst.
The United States Department of Agriculture’s Foreign Agriculture Service (FAS) forecasts that farmers in the European Union will harvest 16.6 million tonnes of rapeseed in 2020-21, the smallest crop since 2006-07.
That should result in another strong year for canola imports to the region.
The FAS forecasts 6.2 million tonnes of imports in 2020-21, almost identical to the 6.3 million tonnes for the crop year that just ended.
“There is good supply on the global rapeseed market due to higher production in Australia and Canada, while the prospects for the Ukraine are lower,” stated the FAS report.
“However, competition with China on the global market might limit import volumes.”
The EU was Canada’s second biggest buyer behind Japan last year. It imported 2.1 million tonnes of Canadian canola.
MarketsFarm analyst Bruce Burnett said the EU is definitely going to be an active buyer of Canadian canola in 2020-21.
That means there will be a strong export program out of Thunder Bay in addition to Vancouver this year, which bodes well for one large group of canola growers.
“What you’re going to see is an improvement in basis levels in the eastern Prairies because there’s going to be strong export demand pull from Europe,” he said.
Burnett noted that EU demand for Canadian canola may even be stronger than last year considering Ukraine harvested a disappointing crop.
The USDA estimates Ukraine produced 2.5 million tonnes of rapeseed, down from 3.47 million tonnes last year. The EU is its main export market.
The EU also imports from Australia but that crop won’t be ready to harvest until November, so Canada has a nice window for sales early in the season, he said.
Neil Townsend, chief market analyst with FarmLink Marketing Solutions, said the one factor that could temper EU demand is COVID-19.
A second wave of the pandemic could result in another shutdown causing reduced fuel consumption in the EU.
“That takes a little bit of the top off of what biodiesel demand might be,” he said.
But with Ukraine’s poor crop Canada might still be able to maintain last year’s export volumes, said Townsend.
Canada’s canola exports are off to a good start with 1.05 million tonnes already shipped through week five of the 2020-21 crop year. That is 21 percent above last year’s pace and 55 percent above the five-year average.
That strong early movement has put a sizable dent in the 2.7 million tonnes of canola carried over from last year, said Townsend. He said the market is going to be running on “absolute fumes” until new crop supplies arrive.
There are reports the supplies won’t be as plentiful as once thought with Saskatchewan and Alberta reporting much lower yields than Statistics Canada estimates.
Townsend believes the EU is going to be a good customer for Canada for years to come due to policy decisions made in that region.
The FAS reports that rapeseed acreage has declined substantially in recent years, resulting in a growing dependence on imports.
“The reason for the substantial decrease in rapeseed area is the ban on neonicotinoids in the EU,” stated the FAS report.
“The ban makes rapeseed cultivation both more difficult and costly. The remaining insecticides available on the market are not as effective, resulting in higher insect damage despite increased frequency of pesticide applications.”