If you’ve taken to market watching in lieu of seeding, there can’t be much comfort in canola prices.
Even though farmgate prices have fallen about $100 per tonne since early spring, June futures prices at the Winnipeg Commodity Exchange fell below $400 per tonne last week.
That’s a marked contrast to market behavior in the past several years, when it made a run at $500 per tonne in May of 1993 and nearly did the same in June last year.
All through the winter, market watchers were marvelling about the strength of the canola market, despite record production.
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Lyndon Peters, oilseeds analyst with Agriculture Canada’s grains policy directorate in Winnipeg, said unexpected demand for all edible oilseeds – soybean oil, palm oil and canola oil – from China, India, Pakistan and Egypt helped keep prices up until recently.
So did the relatively low value of the Canadian dollar, especially against the currencies of loyal buyers like Japan and the United States, and price-sensitive buyers like the European Union and Mexico.
Recent canola prices are reflecting the bigger oilseed picture. The U.S. soybean crop, predicted at 61.45 million acres, is marginally below 1994’s record acreage. No one is worried about the bean crop yet, said Steve Freed of ADM Investor Services in Chicago. “You can plant by the fourth of July and still get good yields.”
Brazilian soybean exports are filling the supply gap before northern hemisphere new-crop supplies come off.
There are early indications the Malaysia palm oil supply is going to recover from last year’s short crop. Germany’s Oil World newsletter recently predicted palm oil production could rise about 20 percent.
Oil World also predicted linseed oil supplies will increase 15 percent in the new crop year.
Add to that a Canadian crush running red margins through the first quarter of 1995, most summer export business done two or three months ago and a stronger dollar and the reason for canola’s price decline becomes clearer, said Ray Bradbury of XCAN Grain Pool Ltd.
But he said the lower prices have started to interest buyers who have been on the sidelines recently. Statistics Canada’s stocks report implies we’ll end the year with stocks between 250,000 and 500,000 tonnes. The high end is comfortable, he said, but the low end is tight. Canadian consumption is 300,000 tonnes a month, even in the summer.
“It really doesn’t leave a lot of room for error,” Bradbury said.
