After a bout of weakness in March, oilseeds have rallied to trade in the same range they’ve been in for most of 2015. .
It is hard to know what, if anything, will dislodge canola from this range.
The oilseed enjoys support from the Statistics Canada seeding intentions report, which showed farmers planned to seed 19.42 million acres, less than what the trade expected.
However, things could change there because farmers usually seed more canola than they think they will in the spring.
The final November crop report showed that canola acreage was significantly higher than what was expected in March in four of the years between 2010 and 2014. Only in the wet year of 2011 did canola acreage fail to reach the March intention.
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Using the average of the gains in the four years, which was five percent, we could expect a final canola area of 20.4 million acres this year.
However, that is not necessarily a burdensome number.
Last week’s Statistics Canada March 31 crop stocks report showed canola stocks a few hundred thousand tonnes less than the trade expected.
Year end stocks could be around 1.2 million tonnes, down from the current Agriculture Canada forecast of 1.45 million tonnes, so that too is supportive.
Using the ending stocks forecast of 1.45 million tonnes shows a stocks-to-use ratio of 8.7 percent. If ending stocks fell to 1.2 million tonnes, the ratio would be 7.2 percent.
That is significantly better than the current ratio of U.S. soybean year-end stocks to use, which is about 10 percent.
However, the current strength in the Canadian dollar is working against canola prices. Thanks to rising crude oil and a bit of a stumble in first quarter U.S. growth, the loonie has rallied to about US83 cents from about 80 cents at the beginning of March.
However, many analysts think the U.S. economy and currency will rally in the second half of the year, pressuring the Canadian dollar lower again.
The rapid pace of seeding in Western Canada and the U.S. Midwest is weighing against the price of canola and other crops. An early seeded crop should flower before the heat of summer, and that is usually good for yields.
On the other hand, there has been little rain in southern Alberta and southern Manitoba this spring.
However, Environment Canada’s three month May-July forecast sees an elevated chance for above normal rainfall in southern Alberta.
This has evolved into a “on the one hand this, but on the other hand that” type of column, which is always a danger at this early point in the growing season.
To stick my neck out, I think canola could stay toward the upper end of its usual relationship with soybean prices, but a serious price improvement would require major growing problems in the U.S. soybean crop this summer.
darce.mcmillan@producer.com
