Agriculture Canada forecasts that year-end canola stocks will grow to 2.15 million tonnes, up 29 percent or 489,000 tonnes from last year.
However, given the good pace of exports so far this year, despite the problems with China, that forecast will likely prove too high.
The Ag Canada forecast, made Dec. 15, had no effect on canola futures, even though the new stocks number is a huge increase from the last forecast made in October.
The October estimate predicted an exceptionally tight 750,000 tonnes of carry over.
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The market had already adjusted when Statistics Canada reported its November crop size estimate, which at 11.8 million was much larger than its September forecast.
Agriculture Canada’s supply and disposition report simply slotted in the new production number and left the demand numbers, exports and crush, unchanged from October.
But as the year progresses, the department will likely have to adjust the export and domestic crush numbers and that will likely lower the year-end stocks number.
Agriculture Canada forecasted exports at six million tonnes, down 24 percent from last year’s record of 7.9 million tonnes.
But with more than one third of the marketing year complete, canola exports so far are down only 2.5 percent. And it appears strong movement will continue for the immediate future.
Even with China’s restrictions on imports of Canadian canola, the lineup of vessels at Vancouver to take canola from mid-December to early January totals close to 440,000 tonnes, little changed from the same period last year.
With such good numbers already on the books, exports through the winter and spring would have to collapse to match Agriculture Canada’s gloomy forecast, and that seems unlikely.
On the domestic side, the department forecasts crush for the year at five million tonnes, up 17 percent from 4.28 million last year. The reasoning is that new crush plants are opening.
But so far this marketing year, the crush is lagging last year’s number, down 6.7 percent. Problems exporting canola meal to the United States because of salmonella contamination have lessened crushing’s profitability.
Crushing might pick up yet.
Cargill’s Clavet, Sask., facility recently got a clean bill of health from the U.S. and the new Louis Dreyfus plant at Yorkton, Sask., is scaling up production and should be able to export meal to the U.S.
Just for speculation, let’s say that by the end of the year the crush total winds up equal to last year and exports are down only 10 percent instead of 24 percent, putting it at 7.1 million tonnes instead of six million.
If that were the case, ending stocks would be only 1.8 million tonnes, much less burdensome than the 2.15 million now forecast by Agriculture Canada.
