Canola still looks like the crop to grow in 2010, even if American farmers are cranking up their acreage, analysts say.
There is strong demand and canola is particularly strong among oilseeds. It’s the cereal grains, not canola, that are likely to be under pressure this season.
“It’s got a better demand outlook than soybeans has,” said Union Securities broker Ken Ball after the U.S. Department of Agriculture’s spring planting intentions report March 31.
“Our crush is strong and our exports are still decent.”
Read Also
Going beyond “Resistant” on crop seed labels
Variety resistance is getting more specific on crop disease pathogens, but that information must be conveyed in a way that actually helps producers make rotation decisions.
American farmers are boosting their intended area of canola by about 400,000 acres to 1.2 million acres, mostly in North Dakota.
That’s only a minor addition to the Canadian acreage, but a possible sign of behaviour from prairie farmers.
But Ball doubts farmers will flood the canola market.
“Even with a very, very large canola crop, we could bring inventories down,” said Ball.
“There should be some potential for it to show relative strength.”
While expected large spring seeding has weighed on the market, crushers’ problem with salmonella in canola meal has also affected the relative value of canola seed, meaning they are not getting the paper value of the crush margin.
Crushers who can’t export meal to the U.S. because of the salmonella ban have sold the meal into secondary markets that don’t pay as well, analysts say. That reduces the value to those processors of the seed and lowers the amount they are willing to pay for it.
All crop prices have been under pressure recently, but Ball thinks canola could have a good rebound.
“Despite some negative situations, we’ll bottom these markets out at some point and canola should perform well once we get some positive upswings in the market.”
