The sudden disappearance of lots of canola won’t remove the shadow that has depresed prices all winter, experts say.
But it may signal the end to the slump that has lowered farmers’ spirits.
“I think the lows are in here, at least for the next few months,” said Glen Pownall, who oversees canola hedging for Agricore United.
“Your carryout isn’t as offensive as it once was.”
Canola futures prices climbed above $250 per tonne recently and bounced off $260 on March 27 before settling at $258. This has happened even as Brazil soy farmers harvest a record oilseed crop.
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Prices fell below $240 this winter after many forecast a three million tonne mountain of canola at the end of the 2005-06 crop year.
But analysts now predict a smaller carryover because of strong exports and domestic crush.
At the Canadian Wheat Board’s Grain World conference, analyst Greg Kostal estimated a 2.5 million tonne carryover, and other industry players agreed.
Lach Coburn of Cargill in Vancouver thinks that’s too optimistic.
“I’m not sure that’s in the cards,” he said.
His estimate for a 2.75 million tonne carryover, which is lower than what he expected before, is based on heavy exports and crush.
“It’s been moving great,” said Coburn. “I think we’ve taken the carryover down somewhat, but we haven’t solved all of it.”
Pownall is more bullish, expecting a 2.1 million tonne carryover by July 31. With a present consumption rate of 700,000 tonnes per month, that 2.1 million tonnes doesn’t look so intimidating.
“It’s amazing the pace that we’re running at right now,” said Pownall.
European biodiesel production is drawing in canola oil and seed from all over the world, he said, noting sales to crushers in Dubai and Pakistan who sell oil to Europe.
Since biodiesel production seems to be a permanent new market factor, canola users may have to bid more aggressively for canola, and buy acres of canola this spring by running prices higher, Pownall said.
“The rate of consumption is dramatic and that’s what the market needs to focus on.”
“With biodiesel demand being so strong, you just don’t have room for a crop failure any more.”
