Canola exports in the week ending May 12 finally showed life, with 322,800 tonnes shipped, the most in a single week this year, according to Canadian Grain Commission figures.
Exports of the oilseed will need additional strong showings in the remaining 11 weeks of the crop year to avoid falling short of the forecast for seven million tonnes of exports.
If they don’t, the year-end supply will have to increase from the current forecast of two million tonnes.
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Western Producer reporter Sean Pratt has had stories in recent papers explaining the reasons for the slow pace of canola exports. The main factor is strong competition from Australia, which had a bin-busting record harvest last year and is willing to undersell Canadian product in order to get market share.
To hit Canada’s seven million tonne export forecast, shipments will have to average 169,500 tonnes a week to the end of the crop year.
That will be a stretch. In the 10 weeks before the big 322,800 tonne shipment, the weekly average was only 144,000 tonnes a week, with a low of 40,600 in week 35 and a high of 239,500 in week 32.
A higher-than-expected year-end supply won’t help canola’s price, which is already held back by a generally improved spring moisture situation in Canada and the United States that should help get oilseed crops off to a good start so long as the rain delays don’t wind up pushing back seeding too far.
In April, oilseed prices had been supported by rising crude oil values that topped US$86 per barrel on worries about a possible war between Israel and Iran, but that situation has cooled and crude was back below $80 as of last week.
Another negative in the oilseed market is the slow marketing of the 2024-25 U.S. soybean crop. Usually by now there are sales on the books, but this year marketing is very slow and China has yet to book any new crop cargos from the U.S.
And another weight on oilseeds is the U.S. Department of Agriculture forecast that global soybean production will outstrip demand in the 2024-25 crop year, resulting in a build-up of global year-end stocks.
However, farmers in southern Brazil are still struggling with excessive rain and flooding that hurt the tail end of the soybean harvest, If the damage to the crop turns out worse than expected, that could help lift oilseed prices.
Last week, Brazilian forecaster Conab increased its outlook for the country’s soybean crop by 1.16 million tonnes to 147.68 million, but that was because of an upward revision to the number of seeded acres. Its yield estimate slipped.
However, Conab added that the full impact of the flooding in the south had not been accounted for yet.
The Conab soy forecast is still below the USDA’s forecast of 154 million tonnes.
Turning to wheat, Canadian exports should have no trouble hitting the forecast of 20.25 million tonnes, so long as the railways and the Teamsters union can avoid labour disruptions.
Canadian wheat exports have averaged about 417,000 tonnes per week so far this crop year. If that pace held through to the end of the crop year, total exports would be 21.7 million tonnes, or 1.45 million more than the forecast.
Wheat has seen a nice price rally this spring, supported by drought and frost stress on the crop in southern Russia.
But offsetting that support was news last week from the U.S. hard red winter wheat tour that the American crop might yield higher than the current official USDA forecast.
The tour estimated Kansas wheat’s yield potential at 46.5 bushels per acre, while the USDA’s forecast is 38 bu. per acre.
The tour forecast the state’s production at 290.4 million bu. while the USDA’s forecast is 267.9 million.
Good yields in central and northern areas more than made up for the poor conditions in the southwest, where drought lingers.
Turning to the wider economy, the U.S. monthly inflation reading for April came in lower than expected last week, reviving hopes the Federal Reserve will lower interest rates this year, although the first cut is not expected until September.
The stock market rejoiced and the Dow Jones Industrial Average reached a record high, topping 40,000. A string of strong earnings reports from major American companies also supported stock market prices. The S&P 500 and the Nasdaq Composition also posted record highs last week.
Generally, analysts expect the Bank of Canada will start to lower its interest rate this summer, perhaps in June.
The S&P-TSX Composite also hit a record high last week.
After a poor performance last year, the S&P-TSX has climbed 7.41 per cent so far this year, which outpaces the Dow’s 5.76 per cent climb.
