Soybean’s price rally, ignited by spreading dry conditions in the U.S. Midwest, has generated less heat in canola markets.
The reason is that it appears the canola supply will outstrip demand in 2005-06 leading to increased year-end stocks whereas U.S. soybean supply will be less than demand, causing a drawdown in ending stocks.
From June 30 to July 18, Chicago November soybeans rose to $7.28 US per bushel from $6.66 an increase of nine percent, while Winnipeg November canola has risen to $302.90 Cdn per tonne from 285.80 on June 30, a change of six percent.
Read Also
Canada-U.S. trade relationship called complex
Trade issues existed long before U.S. president Donald Trump and his on-again, off-again tariffs came along, said panelists at a policy summit last month.
Soybean prices jumped higher when the hoped for rain from the tail end of Hurricane Dennis did not materialize and the condition of the soybean crop, particularly in the key producing state of Illinois, deteriorated.
Meanwhile, canola crops in Saskatchewan and Alberta look good, maybe even record, offsetting the drowned out crops of Manitoba.
Agriculture Canada’s June 28 Grains and Oilseeds report puts 2005-06 canola production at 7.5 million tonnes and traders are a bit more optimistic, forecasting a 7.5-8 million tonne crop. Last year’s crop was 7.73 million.
Agriculture Canada forecasts 2005-06 ending stocks will climb to 2.1 million tonnes, up from 1.725 million.
The U.S. Department of Agriculture has forecast U.S. soy production at 78.65 million tonnes, down from last year’s record 85.48 million. It sees 2005-06 ending stocks falling to 5.71 million tonnes, from 7.89 million in 2004-05.
Canola is also likely to see strong competition internationally. Europe’s canola production is expected to be slightly smaller than last year’s bumper crop, but bigger than average.
Australia’s crop was threatened early in the year by drought but June rain rescued it. It is now forecast at 1.31 million tonnes, down only a little from last year’s 1.53 million tonnes.
The American crop, grown mostly in North Dakota, also looks good. Area increased to 1.09 million acres, up from 865,000 last year.
Another factor working against canola is the relative strength of the Canadian dollar, which seems to be settling in at a couple of cents stronger than it was earlier this year.
The lesson to be learned from all of this is that barring another August frost, there is nothing in the canola picture to drive its price higher. So this soybean rally, which has dragged canola a little higher, might present a pricing opportunity.
