Canada’s two main canola competitors are facing production shortfalls in 2009-10.
The influential publication Oil World projects Ukraine will harvest 1.5 million tonnes of rapeseed, a big drop from last year’s output of 2.9 million tonnes, because of April frost damage.
The oilseed forecasting service expects a sharp decline in Ukrainian exports to 1.3 to 1.35 million tonnes, half the record 2.64 million tonnes shipped in 2008-09.
As well, the Australian Oilseeds Federation predicts 1.7 million tonnes of canola production in that country, down from 1.9 million tonnes harvested in 2008-09.
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Seeding of the Australian canola crop is up seven percent but it has been dry in Western Australia, where half of the crop is planted, leading to the reduced production prospects.
The state received a much-needed rainfall last week but a Perth-based grain handler said farmers had already moved away from planting canola in that state, so the final seeding number could also be reduced.
Canada is the world’s leading canola exporter. Shipments in 2008-09 are forecast to reach a record seven million tonnes, followed by Ukraine at 2.6 million tonnes and Australia at 905,000 tonnes. Any production reduction in those two competitors is welcome news.
“Anything that takes supply off the table helps,” said Darren Frank, market analyst with FarmLink Marketing Solutions.
Analysts differ on the magnitude of the looming shortfall in Ukraine’s rapeseed harvest. UkrAgroConsult and the U.S. Department of Agriculture’s Foreign Agricultural Service both forecast 2.2 million tonnes of production.
Even at that higher forecast, exports would still significantly decline, and the USDA reports that most commodity analysts expect a second consecutive year of below-normal grain quality because of reductions in the use of pesticides and a mild winter that could result in increased disease problems.
Ukraine sells most of its excess rapeseed to the nearby European Union biodiesel market. Less Ukrainian product to service that market could create a marketing opportunity for Canadian canola, which gained access to Europe in March after being banned from the region since the 1995 introduction of GM canola.
“It never hurts to have another buyer,” said Wild Oats Grain Market Advisory analyst John Duvenaud.
However, he doesn’t foresee much Canadian canola going to Europe.
“I don’t think we’re going to have enough canola to ship any to Europe between all the new (Canadian) crushing facilities and strong Asian demand.”
Frank also doubts that Europe will be a big market for Canadian canola in 2009-10.
“We’re not banking on much going over there at all simply because biodiesel margins just aren’t that attractive right now,” he said.
He also cautioned against getting excited about early reports of a decline in Australian production because it’s too early in the growing season. However, if it remains dry in Western Australia, that could have a big market impact.
Grain industry analysts have also expressed concern about Canada’s canola crop, which has been exposed to early season frosts, but Duvenaud doesn’t think the concerns are justified.
“Generally it’s not an issue. It didn’t get cold enough over a big enough area to make a difference,” he said.
Frank is more worried about the lingering dryness in western Saskatchewan and eastern Alberta, which could effect germination.
Other big market movers will be Canada’s final seeded acreage number and whether China will once again be a voracious buyer of oilseeds in 2009-10.
