Crop analysts and industry officials are casting doubt on Agriculture Canada’s canola acreage forecast.
Rod Merryweather, North American oilseeds business operations manager with Bayer, said the government estimate made in early March of a record 17.2 million acre crop is overly ambitious.
“Our forecast is in the neighbourhood of 15.8 million acres, which is actually down marginally from seeded acres last year.”
Merryweather said a considerable supply of canola is in the system and in farmers’ bins despite record sales to China. He doubts farmers will shorten their rotations to grow more canola during a period of tough economic times.
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“When those things occur, it is less likely that people are going to do something that is outside of the norm,” he said.
“They’ll go back to what they believe is a safe rotation.”
Cornie Thiessen, Dekalb’s branded seed business manager for Western Canada, said he too expects fewer acres seeded than last year.
“It seems difficult to see how we can get up to that 17.2 million acre number based on what the market has seen to date,” he said.
“This year seems to have a little bit more uncertainty around it than the last few years at this time of year.”
Dekalb has forecast about 15.5 million seeded acres, he said.
ProMarket Wire analyst Errol Anderson thinks Agriculture Canada overestimated by one to two million acres.
He believes high input costs and reduced fall purchases of fertilizer will slash acreage and production.
Anderson predicts a 2009-10 crop of 11 to 11.5 million tonnes, down from the 12.6 million tonnes harvested last fall.
When that is combined with the anticipated decline in world soybean production, it appears as though oilseed markets, including canola, should be strengthening.
“The whole picture really looks firm to us. I think new crop canola bids are just going to move higher,” Anderson said.
Bids last week were in the $9 to $9.50 per bushel range. He sees “real potential” to exceed $10 per bu.
“The only thing that could derail this, really, is if the stock market suddenly plunged and we had another wave of dismal financial news.”
Merryweather forecasts 12.1 million tonnes of production. He is more optimistic than Anderson because of the continued trend toward hybrid adoption, but he doesn’t believe growers can match last year’s record output.
“It was probably the best crop we’ve ever had and I just don’t think that can happen twice in a row.”
He thinks carryout will be 1.8 million tonnes, down from Agriculture Canada’s forecast of 2.6 million tonnes for the 2008-09 crop.
“There is lots of demand for canola right now and it’s going to surprise everybody,” Merryweather said.
If new crop bids surge to $10 or $10.50 per bu. before seeding, that could buy another 500,000 acres.
However, it would take another $1.50 a bu. to come close to Agriculture Canada’s 17.2 million acre figure.
Anderson predicts inflation could also affect commodity markets later this year, which would devalue the American dollar and coax speculator money back into commodity markets.
Commodity funds that have been silent for months will start investing in crops such as soybeans and canola again, he said.
“When (inflation) does (arrive) there could be quite a sprint in prices. But it will be in the futures. The cash market may not follow.”
Statistics Canada will release its seeding intentions estimate April 24.
