Canola crop problems in Ukraine and China may support canola prices this year.
The market is being held down by ample supplies of soybeans in South America and an expected big crop in the United States. But canola production outside of North America is not expected to climb in 2010.
Oil World forecasts a 21 million tonne crop in the European Union, down from 21.5 million last year. It also forecasts EU imports will rise to three million tonnes from 2.35 million last year.
A key EU supplier is Ukraine. Kiev-based consultancy UkrAgroConsult estimated that about a quarter of the 3.5 million acres of winter rapeseed in Ukraine were lost due to a difficult winter, which saw large areas trapped under an ice crust.
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This will be the second year of crop problems. Rapeseed production last year fell to 1.87 million tonnes from 2.87 million in 2008.
The U.S. Department of Agriculture attaché in Ukraine forecasts production of 1.8 million tonnes this year.
Exports almost all go to the EU and are expected to fall to about 1.65 million, down 100,000 tonnes from 2009-10 and down one million tonnes from 2008-09.
Russia is a minor rapeseed exporter, shipping about 80,000 tonnes in the coming year, down from 110,000 tonnes this year, due to rising domestic demand.
So it looks like there might be an opportunity for Canadian canola in Europe in the coming year. The market opened to Canadian genetically altered canola in the current crop year, but so far only 95,000 tonnes have been shipped there.
On the China file, the big question is whether Beijing will change its rules on blackleg infected canola seed.
Canola is still going to Chinese ports outside its main rapeseed production zone, but in amounts smaller than last year at this time.
Canadian market watchers speculate that once the Chinese crop is used up, the restrictions will be relaxed.
Rapeseed is a winter-seeded crop in China. There is a severe drought in southwestern areas that accounted for about seven percent of the country’s normal rapeseed production. A report a few weeks ago said that was expected to cut the region’s crop by about 500,000 tonnes. But conditions were better than last year in the main growing region and overall production was expected to be steady to up slightly.
However, authorities last week talked about potential supply tightness because of colder than normal weather in important growing regions in central and eastern parts of the country.
India is the world’s third largest producer of canola-rapeseed and consumes it all domestically, although it exports some meal. It is not a significant importer.
It too is having problems. In early March the crop was forecast at 6.3 million tonnes, up marginally from last year, but now traders think it will be less because of a hot spring. Gail Martell of Martell Crop Projections this week forecast a 15 percent drop.
Australia is a key competitor to Canadian canola. Seeding has just begun and some forecasters say canola production will increase eight percent to about two million tonnes, marking the largest crop in 10 years. That is based on long-term average moisture. After years of drought, moisture in Australia has been better in recent months, but rain is a fickle thing Down Under.
Lastly, U.S. canola area is expected to rise 400,000 acres from last year. That is significant, but still small compared to the expected increase of one million acres or more in Canada.
If you want to keep track of canola futures prices using your Blackberry or other browser-equipped smart phone, go to Producermobile.com. There you will see how to put Producermobile on your phone’s home screen.
