Canada’s biggest canola export competitor is suffering critical problems with drought.
Many analysts think eastern Australia’s canola crop will be much smaller than average, with many fields not seeded.
But canola markets appear not to have reacted and prairie farmers aren’t seeing higher prices.
“In any other year, if there was a drought in a major exporter, you’d expect some excitement,” said canola market analyst Nolita Clyde of Ag Commodity Research.
“Not this year.”
The difference is that the market is flooded with Canadian canola. Most analysts expect big canola stocks to persist to at least the end of the 2005-06 crop year.
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“Even if you write off half of Australia’s export crop, it’s not really expected to be a big deal, because everyone’s expecting ending stocks to rise further next year,” said Clyde.
Eastern Australia is home to most of that country’s richest canola land and its crushing industry. In recent months, little rain has fallen and farmers have held back on planting their winter canola crop.
They need to seed by the end of May to ensure that the crop will not be flowering when the temperatures rise in October and November. June seeding sometimes occurs, but is rare.
“There is some dry seeding going on in the hopes that the rains will come over,” said Clyde.
“But they’re very much running out of time.”
The main problem for Canadian producers is domestic carry-in stocks are expected to rise sharply, to 1.4 million tonnes, the second highest on record.
The 2005-06 crop is expected to be average.
Clyde forecasts 2005-06 world ending stocks to be 2.4 million tonnes, which is high enough to keep prices down.
Even if half of Australia’s typical one million tonne export crop is lost, it still leaves 1.9 million tonnes among exporters, leaving buyers free of the fear of running short.
Also undercutting the impact of the drought in eastern Australia is the nature of the crop in western Australia. That area has good moisture, and most of the crop is exported because there is little crushing in the region.
“No one’s too excited. It’s pretty ho-hum. This drought will take some of the negativity out of the market. It means our lows may not be as low,” said Clyde.
The only thing that will kick canola prices noticeably higher is a huge crop failure somewhere, or a surge of new consumption. Until that comes, canola prices will probably drift.
“There’s no unexpected demand yet and Canada clearly has large supplies,” said Clyde.
