Canola prices ready to rise?

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Published: January 24, 2002

For a market analyst, Don Bousquet is a pretty good comedian.

The general manager of Resource News International had no trouble

getting laughs from the room full of canola growers at a recent meeting

in Saskatoon.

The formula was simple. Just tell them they’re going to get rich.

“This is the year,” he said as he launched into his market outlook.

“This is the year we’re all going to get wealthy.”

Laughter.

Underneath its placid surface, he told them later, the market is

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heating up and getting ready to boil over.

More laughs, the somewhat cynical, head-shaking laughter of farmers who

have heard it all before.

“It’s so bullish you guys should be filthy rich,” said Bousquet.

“These numbers justify $14 canola.”

When he wasn’t getting laughs with lines like that, the Winnipeg-based

analyst was making the serious case that canola markets are indeed

poised to take off.

All the signs are in place, he said. Throughout the oilseed complex –

U.S. soybeans, world vegetable oil, Canadian canola – supplies are

tight and demand is strong.

Agriculture Canada is forecasting the canola inventory will dip to an

unheard-of level of 400,000 tonnes at July 31, which translates into a

stocks-to-use ratio of around seven percent.

“That is like having no canola,” said Bousquet. “You can’t get less

than that.”

So why haven’t prices taken off?

The main problem, said Bousquet, can be found south of the border.

Generous subsidies are providing American farmers with soybean prices

well above market levels, boosting acreage and production and keeping a

lid on the market price.

Canola growers will definitely see prices rise in the spring to

encourage plantings, Bousquet said. But exactly what that price will be

remains to be seen.

“The grain trade thinks you need $400 to $425 a tonne futures price to

grow canola,” he said.

“But only you can answer that.”

Agriculture Canada has forecast a 20 percent increase in canola prices

in 2001-02, to an average of $350 a tonne in-store Vancouver.

As far as 2002 acreage is concerned, Bousquet told the farmers in

attendance to plant canola and wheat and avoid barley, oats and special

crops.

“Wheat and canola have the greatest chance to rally,” he said.

In its supply and demand preliminary forecast for 2002-03, Agriculture

Canada projects a 10 percent increase in canola acreage this spring,

with production rising by 15 percent to 5.8 million tonnes.

Exports next year are expected to be up marginally to 3.1 million

tonnes, while domestic consumption will remain unchanged at 2.9 million

tonnes. That will leave stocks on July 31, 2003 of 400,000 tonnes, the

same as July 31, 2002.

The average price for the crop going into the ground this spring will

be $345 a tonne in-store Vancouver, down slightly from this year’s

forecast price of $350, according to the Agriculture Canada forecast.

Bousquet said two other factors bode well for the market outlook. The

Canadian dollar is expected to remain around 62 to 65 cents US, while

Environment Canada’s long-range weather forecast calls for a wet spring

with normal temperatures, followed by above-normal precipitation and

temperatures in the summer and a warm, dry fall.

About the author

Adrian Ewins

Saskatoon newsroom

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