Canola pricing will require close attention

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Published: September 11, 1997

Canola strategists are advising farmers to closely watch basis levels and rallies to find better prices for their oilseed this crop year.

Opportunities for prices beyond the $370 per tonne level may be relatively rare with ample world supplies of oilseeds, and a particularly large soybean crop coming off fields in the United States.

“I’m a little bearish (about) this market, actually, because I guess we’re looking at the potential for a poorer export picture for next year,” said Tony Tryhuk, an analyst for Pool Commodity Trading Service.

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Farmers should watch weekly crush figures from oilseed crushing plants, said Charlie Pearson, of Growers Marketing Services, a division of United Grain Growers.

“If you get canola substantially out of line with the rest of the world, it’s a matter of whether we’re going to have all the crushing plants up and running or not,” he said.

Even with yields chopped by dry weather, Statistics Canada expects a Prairie harvest of just over six million tonnes of canola this year.

But export customers aren’t concerned about running out of seed.

Nolita Clyde, an analyst with Statcom who does a weekly international report on canola, said the 11 major canola and rapeseed producing countries will have 3.6 percent more supply than in 1996-97.

She expects Canadian exports to be around 2.4 million tonnes. Tryhuk’s estimate is 2.2 million tonnes.

“One of our big export markets just may not be there,” he said, referring to the European Union, which has not yet approved the use of genetically modified canola.

“And I think that has some of our Canadian exporters here a little concerned, and it really sort of makes you question what the price prospects are for this new crop.”

Exports to Japan may drop slightly depending on Australian exports, which are hard to predict because some areas of the country have been hurt by drought.

Prefer unmodified seed

Although Japan has approved transgenic canola, some companies may prefer seed that hasn’t been genetically modified, said Clyde.

At home, Pearson expects crushers in Eastern Canada to use some European canola, if the price is right. Ontario and U.S. soybeans may also be attractive options.

Canadian crusher margins seem to have improved recently.

Keeping plants going will be key to absorbing the shock of lower exports. They must crush an average of 60,000 tonnes per week to reach totals predicted by the trade, says Growers Marketing Services.

In the traditionally slow period so far this crop year, crushers have been handling more than 40,000 tonnes a week. Last winter, some crushers shut down because of negative margins, largely because of strong demand for soybean meal. Heavy U.S. soymeal production had left a glut of soybean oil, dragging down vegetable oil prices.

Tryhuk expects soybean oil stocks to be drawn down because of strong demand.

About the author

Roberta Rampton

Western Producer

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