Growers should hold off marketing their remaining canola until February or March, when prices could be on the rise, says an analyst.
Marlene Boersch, a partner in Mercantile Consulting Venture, said Canadian exports will likely be stronger than Agriculture Canada expected in its November forecast because of favourable pricing in international markets compared to soybeans.
That is expected to result in a small carryout of the crop and prices that could climb back to $11 per bushel by the end of winter.
However, growers shouldn’t expect a major price hike because canola will continue to be weighed down by excess soybean supplies.
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World soybean ending stocks have been climbing steadily from 30 million tonnes in 2000-01 to 90 million tonnes in 2015-16.
That is not the case with rapeseed-canola ending stocks, which have been declining of late because of falling global production.
World production is estimated at 67 million tonnes in 2015-16, down from 72 million tonnes in 2013-14.
“There’s a fairly significant reduction over the last three years,” Boersch told delegates attending Agri-Trend’s Farm Forum Event 2015 on Dec. 2, two days before Statistics Canada surprised the market with a canola production estimate.
In the European Union, rapeseed has been losing ground to winter wheat, she said.
The revenue differential between rapeseed and wheat in the EU has fallen from more than US$120 per acre in 2011 to no difference in 2015.
Low oil values and strong meal demand is also supporting soybean production over rapeseed-canola.
The result is declining global rapeseed-canola production and ending stocks.
Boersch also sees tight carryout for canola, although her outlook was made before Statistics Canada shocked analysts with its estimate of 17.2 million tonnes of production.
Boersch was using 15.1 million tonnes in her Dec. 2 presentation, which would result in 17 million tonnes of total supply.
She thought 7.4 million tonnes would be crushed, which is the same amount as 2014-15.
Her export number is 8.25 million tonnes, but she is starting to think that will be low because of an uptick in sales to China.
Japan is forecast to buy 2.25 million tonnes and Mexico another 1.35 million tonnes. The two are consistent buyers of the product.
The wild card is China. Boersch had originally penciled in a three million tonne sales program to that important destination, but she is changing her mind.
She now believes China could end up buying as much as 3.5 to four million tonnes because canola has just recently become favourably priced compared to soybeans.
It means her already low 2015-16 carryout estimate of 1.3 million tonnes and stocks-to-use ratio of eight percent could be reduced even further.
Boersch said growers she works with have sold 60 percent of their canola. She is advising them to hold out for $11 canola in February or March, but again, that was before Statistics Canada found an extra two million tonnes of the crop than she was expecting.
She believes the best flax prices are already in the rearview mirror because of big crops in the United States and the Black Sea region.
U.S. production is up 75,000 tonnes from last year and Black Sea flax is up 80,000 to 100,000 tonnes, which will limit marketing opportunities for Canadian flax into the U.S. and the EU.
That leaves the Chinese market, and Boersch doesn’t believe it will pick up the slack. It’s why she is puzzled by Agriculture Canada’s ambitious 800,000 tonne export forecast.
“I can only get to 700,000 tonnes. I’m totally at a loss where the other 100,000 tonnes would go,” she said.
Boersch said growers should have pounced on $14.50 flax bids during harvest.
sean.pratt@producer.com
