Domestic canola demand is booming, with crushers processing more than 131,000 tonnes last week, up from about 74,000 tonnes last year.
So far this crop year, members of the Canadian Oilseed Processors Association have crushed 1.268 million tonnes, up from a little less than 835,000 last year.
Despite strong seed prices, the newly expanded crush industry appears to be profitable with operators pushing their plants closer to capacity.
The crush capacity use rate rose to slightly more than 90 percent last week, a rate not seen in more than a year.
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Statistics for canola oil exports this crop year are not yet available, but likely China is buying a significant part of the oil produced.
In December last year, it said it would double canola oil imports, partly offsetting the sting from its restrictions on canola seed imports due to concerns about blackleg disease.
But seed exports are also up this crop year, at 1.37 million tonnes to Oct. 17, compared to 1.26 million last year. Stronger sales to the United Arab Emirates, Pakistan, Bangladesh and Mexico in September more than made up for weaker exports to China.
This strong domestic and export demand is helping to support canola prices at two year highs, despite talk in the market that the crop might be better than expected a month ago.
Given this strong demand, a larger crop estimate should not be detrimental to price.
Agriculture Canada earlier this month forecast exports for the crop year would fall 16 percent to six million tonnes and domestic demand would grow 15 percent to 5.5 million tonnes.
With smaller total supply, that demand forecast resulted in a yearend stocks outlook of a tight one million tonnes, down from 2.1 million at the end of 2009-10.
We are only 11 weeks into the new crop year, but so far domestic demand is running 34 percent ahead of last year and exports are up eight percent, both far exceeding Agriculture Canada’s forecast.
Canola’s supply and demand fundamentals provide good support for continuing strong prices.
