Grain analysts are bullish about canola despite the trade restrictions implemented earlier this month by last year’s top customer.
“There is no reason to panic at the moment at all because we have done most of our sales to China already,” said Marlene Boersch, managing partner of Mercantile Consulting Venture Inc.
She told delegates attending Agri-Trend’s 2009 Farm Forum Event that Canadian exporters shipped 1.2 million tonnes of canola to China before its Nov. 15 imposition of highly restrictive quarantine measures related to blackleg.
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Boersch had expected 1.4 million tonnes of exports to China in her 2009-10 canola supply and disposition report, meaning a 200,000 tonne shortfall to that destination.
“So even if we don’t do anything to China for the remainder of the year, we will be all right. That’s a very important message,” she told delegates.
Dave Reimann, vice-president of Informa Economics, is also optimistic about canola.
Earlier this year, when preparing his canola supply and disposition report, Reimann scaled back sales to Pakistan, Bangladesh and Mexico in anticipation of a big export program to China. If that fails, the other countries can pick up the slack.
“(The blackleg situation) is not going to result in a glut of canola on the market,” he said during an interview after speaking at the Balancing the Bottom Line conference.
China’s announcement caused a drop in canola prices, but they have stormed back despite problems shipping canola meal to the U.S.
“If we’re exhibiting that kind of strength with bearish news, if we get some bullish things happening over the next six months, then there’s probably a little more upside than downside,” he said.
Favourable factors that may eventually sway markets are the continued strong global demand for vegetable oil, a delayed U.S. soybean harvest and a poor start to Argentina’s soybean crop.
Boersch said strong exports should also help. Canada has sold 3.06 million tonnes of canola, which leaves 2.56 million tonnes to be sold and shipped from January to July.
“That’s not bad,” she said.
With 4.6 million tonnes of domestic crush, carryout should be a reasonable 883,000 tonnes.
That would be well below last year’s 1.05 million tonnes, which bodes well for the market outlook.
“Don’t sell the canola now. Hold on,” she told growers attending the conference.
“We will see the market come back to you in the winter time.”
The outlook is not nearly as rosy for flax, which is suffering through its own serious market access issue.
Boersch estimates 485,300 tonnes of flax carryout, up from last year’s already burdensome 283,300 tonnes.
“That’s not very good,” she said.
