BRANDON – Canola growers and soybean growers around the world are of two minds about 2007 seeding plans.
Most canola growers expect to seed more in 2007. Soybean growers are cutting back in favour of corn.
That means the premium canola prices have enjoyed over soybeans and other oilseeds in Europe and North America could end by this summer, said Thomas Mielke, publisher of Oil World magazine.
Mielke told Manitoba canola growers that their crop is about to become less attractive to the market compared to its oilseed sisters.
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“We expect the current price premium of (canola seed) relative to soybeans … will narrow simply because the production outlook for canola is much better than for soybeans,” said Mielke. “The price premium of rape complex and canola seed and oil relative to soy will narrow.”
Mielke was astounded by the number of canola growers he met in Manitoba who planned to increase their canola acreage this spring. That will pressure prices if farmers across the Prairies boost production.
“Everybody I’ve talked to here indicated he is increasing his crop,” said Mielke. That will add to an expected worldwide acreage increase.
“Without Canada, the world production of rapeseed and canola is likely to rise by four to five million tonnes of canola alone,” he said.
That includes bigger crops in Europe, Russia, Ukraine, Australia and China.
Fortunately for canola growers, canola prices will almost certainly stay strong because the world demand for vegetable oils in general and soybeans in particular will keep overall oilseed prices high.
“We are running into a shortage in 2007-08, partly because of insufficient production of soybeans and soybean oil,” said Mielke.
But the premium canola holds over other vegetable oils will almost certainly decline as bigger canola crops contrast with smaller soybean crops.
Analysts expect U.S. corn areas will increase by seven to nine million acres, with most of the area taken from soybeans.
That means soybean prices will likely be this year’s big oilseed winner, Mielke said. When bigger canola crops start coming to market this summer, and smaller soybean production is verified, the price spread of canola oil to soy oil will narrow.
“There could be some pressures down the road in canola prices if those favourable production prospects materialize sometime in June, July, August,” said Mielke.
So farmers might continue to receive good prices this year, but they probably won’t get the same price spikes that soybean growers might enjoy, and they won’t continually hear about canola’s surprising strength compared to other oilseed crops.
