Nolita Clyde showed up at Grain World thinking she was holding the ugliest crop in her hands.
But she left feeling that she had the best of the bunch.
“Canola’s looking pretty damned good in comparison,” said Clyde, an analyst with Statcom Ltd. who gave the canola market outlook for 2003-04 at the Canadian Wheat Board’s Grain World conference.
“It’s nothing wonderful about oilseeds, but wheat and barley look awful.”
The wheat board stunned many farmers and people in the grain industry when it announced its price outlook for wheat and barley in 2003-04. Prices are far below this year’s prices and well below what many expected.
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Clyde went to the conference planning to show a returns-per-acre projection for all the major prairie crops calculated by Saskatchewan Agriculture. Canola and flax scored much lower than barley, oats, CPS wheat and spring wheat.
She thought these projections would only add to the glum forecast for canola and make farmers less likely to plant a big acreage in the spring.
But the wheat board’s first Pool Return Outlook for 2003-04 showed much lower wheat prices than the Saskatchewan Agriculture projection expected and canola suddenly became the highest-earning crop for 2003-04.
“Everything’s different now the wheat board has released the new PROs,” said Clyde.
Canola prices are most likely to fall between $355 and $375 per tonne she said, with a 40 percent chance of falling below $355 and a 25 percent chance of reaching above $375.
These are lower prices than this year’s, which at times reached $460 per tonne, but an average crop will return canola to a more normal relationship to soybeans. For 2002-03, canola has been receiving prices far higher than it would if it had its usual premium of about $30 US per tonne. At some points the canola premium has been over $60.
With a normal crop, canola’s price will return to tightly following soybean prices and reflect overall conditions in the vegetable oil market.
Canola will face the hurdle of winning back markets and buyers who have been driven away by high prices. Clyde said the U.S. market usually takes about 60 percent of Canadian canola oil exports, but this year took 85-90 percent. That means almost all other foreign markets were cut off from Canadian canola oil and seed.
A normal crop will produce more than the U.S. and Japanese markets will consume at present prices and other buyers such as China and Mexico will have to be bought back.
“To get these markets back we’ll have to compete and we can only compete on price,” said Clyde.
“That’s how we lost them and that’s how we’re going to have to get them back.”
Clyde said Canadian canola crushers have had a terrible year. They have the capacity to crush more than four million tonnes of canola but this year will be lucky to process two million tonnes.
Farmers may not like seeing canola prices fall, but getting a good crop will be good in the long term by keeping the domestic crushing industry alive and by gaining back some lost markets.
While prices for the coming crop aren’t exciting, offers of $7.70 Cdn per bushel aren’t reason for despair.
“Historically that’s not a bad price,” said Clyde.
“It’s not $10, but it’s not as bad as wheat.”
