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.
