Prices and profitability for oilseeds have generally been stronger than for grain because soybeans, canola and other oil crops have not suffered burdensome global oversupply.
However, last week’s U.S. Department of Agriculture monthly supply and demand report underlined that global soybean stocks are not as tight as they once were.
And that affects Canadian canola prices because they move within the context of the wider oilseed market.
The USDA raised its estimate of current global year ending stocks by 2.5 million tonnes to a record high 90.1 million tonnes.
Read Also
Crop conditions a pleasant surprise
Market analysts found some stressed crops and some good ones on pre-Ag In Motion 2025 crop tours,
That raised the global stocks-to-use ratio to 27.2 percent, the highest since 2010-11.
If you look at the U.S. by itself, its stocks-to-use for the current and 2017-18 crop years are in the 10 to 11 percent range, well up from the level of the previous five years when the ratio was around five percent or less.
Not surprisingly, soybean prices are the lowest in years.
The oversupply in 2010-11 melted away when sharply lower soybean yields in Brazil and the United States reduced production and lifted prices. By the end of 2011-12, the global stocks-to-use ratio was a tight 20.5 percent.
Looking ahead to 2017-18, the USDA expects that with big production from South America and the U.S. there will be ample low cost supplies that will stimulate demand.
That demand should help to trim the oversupply but not by a lot.
It forecast the global 2017-18 carryout at 88.8 million tonnes for a stocks-to-use ratio of 25.8 percent.
The USDA report had a little better news for corn.
Its forecasts for U.S. domestic and global current year carryout were less than expected.
And it sees the domestic and global carryout falling in 2017-18, with the domestic ratio falling to 14.8 percent from 15.7 percent and global carryout falling to 18.4 percent from 21.3 percent.
The global carryout ratio would be the tightest in four years.
As for wheat, the U.S. has produced big crops in recent years and because of its strong dollar has had trouble competing on the export market. It wound up with an usually large amount of global stocks.
Its stocks-to-use ratio in 2015-16 and 2016-17 was more than 50 percent. With a smaller crop in 2017-18, the USDA expects the carryout stocks to fall and the ratio to drop to 41.7 percent. Although better, that is still not considered tight.
Globally, the wheat surplus is expected to grow. The USDA forecast the 2017-18 stocks-to-use ratio at 35.1 percent, the highest since 2001.
However, there is always a caveat with the global wheat number because China holds so much of the world’s stocks.
Its percentage of global stocks is forecast to rise to 49.6 percent, up from 43.4 percent at the end of the current crop year.
China will likely never put those stocks on the world market so I’d argue they are irrelevant in the supply-demand relationship.
However, I lose that argument because the mindset of the wheat trade is that global supply is more than ample and there is no reason to rally prices to encourage production.
