Oilseed growers glow (gloat?)
“We think this year will be the year of the oilseed. Everything, everything, everything points to it.”
Don Bousquet, who spoke these words, knows how to send a group of canola growers home with a smile.
The Winnipeg market analyst describes himself as an optimist and his orientation was clear when he spoke at the Crop Production Show here last week.
He forecast canola will soon reach $8 a bushel and is on its way to $10.
Why the optimism?
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The world is expected to consume more oilseeds than it produced again this year. At the end of the 1996-97 crop year, the stocks-to-use ratio will be 12-13 percent, far below the 20 percent considered safe.
The market’s weakness this fall was due to its concentration on the very large U.S. bean crop. That psychology took a hit Jan. 10 when the United States Department of Agriculture surprised most analysts by reducing its soybean production estimate from the December forecast.
This lower production and a forecast of higher domestic crush caused USDA to lower its soybean ending stocks estimate by 25 million bushels to 155 million.
So the situation is improving for the price of competing oils, what about canola?
Statistics Canada estimates Canadian farmers harvested five million tonnes of canola, down from 6.44 million last year.
But Bousquet asks: Did we produce five million tonnes? How much was yet to be harvested when snows came? Will the seed be any good if harvested this spring?
He says if the melt is slow, then probably the seed can be salvaged, but if it’s a fast melt, then it will be damaged.
Bousquet also notes northern Europe has seen bitter weather that might hurt its winter rape crop, opening the potential of exports of Canadian canola to Germany and Poland.
This isn’t the first optimistic talk about canola. Some analysts said the same thing last fall, just before the market broke on news that Canadian crushers were temporarily closing or reducing operations because margins were too tight.
But Bousquet notes, despite things supposedly being so bad, the crush pace has been good.
The only possible negative in this story is a rise in the Canadian dollar, as many analysts expect. The price of canola drops as the loonie rises.
Nevertheless, Bousquet predicts March futures will reach $450 per tonne.
