An international oilseeds analyst is urging Canadian canola producers to feed the demand.
Thomas Mielke, publisher of the influential oilseed market publication Oil World, recommends that farmers open their bins and take advantage of strong international demand for their oilseed.
A developing La Nina weather system is causing dry weather in Argentina and could cause dry weather this summer in the United States, he said, raising the possibility of an oilseed price rally.
However, waiting to see what happens is a gamble, especially when current prices and demand are attractive.
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“Canada is the only store in town for the world market in January-July,” he told producers Jan. 15 at the Saskatchewan Canola Growers annual meeting held as part of Crop Production Week in Saskatoon.
“If you don’t sell, waiting for higher prices, you won’t see the export performance and you may stay with a much higher carryout than we currently believe in.”
He said another reason not to wait is the precarious state of the global economy, which could deliver more unwelcome surprises and knock commodity prices down again.
Agriculture Canada’s December supply and demand outlook for 2008-09 predicted exports of 6.3 million tonnes, up 11 percent from last year, and carry-out stocks of three million tonnes, about double last year’s number and a weight on market prices.
However, the actual export experience so far this year is much better than the forecast, with exports to the first week in January up 32 percent.
Based on the strong exports, Mielke is forecasting a carry-out of 2.5 million tonnes.
The strong demand for canola is partly the result of weak demand and prices for soymeal, which is hurting the crush profit margin for soybeans. Canola’s higher oil content gives it a more attractive crush margin, he said.
Looking toward 2009-10, Mielke said concerns about adequate supply should again dominate market thinking. High prices in 2008 sparked a huge increase in global oilseed production, but demand also increased significantly.
Although global carry-out stocks will increase by about five million tonnes this year, it does not make up for the 11 million tonne decrease the year before.
“So the world supply is in a relatively tight situation still.”
Mielke expects that vegetable oil production in 2009-10 won’t be enough to cover demand, leading to smaller stocks.
Global canola production in 2008-09 soared nine million tonnes to 57.7 million tonnes after several years of static production in the 46 to 48.7 million tonne range.
Record acreage, yield and production in Canada accounted for 3.1 million tonnes of the increase.
Ukraine has rushed into canola production, climbing to 2.87 million tonnes from only 600,000 tonnes two years ago.
European Union production climbed modestly to 18.9 million tonnes from 18.36 million the year before, and the Australian crop is estimated at 1.38 million tonnes, up from 1.07 million the previous year.
Mielke said Ukrainian production could grow aggressively to five to six million tonnes by 2015. Sitting on the European Union’s doorstep, almost all of Ukraine’s production this year went to the EU biodiesel industry.
However, Mielke is not optimistic about growth in other big production regions. He said China and India, because of urban expansion and degradation of agricultural land, will struggle to maintain their production of 11.6 million tonnes and 6.4 million, respectively.
In fact, he sees their canola imports rising in the future. They have been huge importers of soybeans and palm oil, but there are only so many uses for palm, and there is political concern about being so dependant on American soybeans and Malaysian and Indonesian palm oil.
“For India, a third leg, canola imports, would be the preferable political option. There is a potential for considerable change regarding rapeseed imports.”
The same is true for China, but Mielke said Canada must improve its rail and port system if it expects to capture increased market share in that country.
