Canadian farmers are expected to produce 10.37 million tonnes of canola this year, topping last year’s record crop of 9.53 million tonnes, based on Statistics Canada’s latest estimates.
In its Aug. 22 forecast of field crop production, Statistics Canada said the increase of 847,000 tonnes was calculated from an anticipated average yield of 29.3 bushels per acre on 15.6 million acres of canola.
Canola prices on the ICE Futures Canada market dropped to $550 per tonne on news of the record crop, but a Winnipeg broker said the key for canola prices is not Canada’s oilseed production, but the U.S. soybean harvest.
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“Our canola crop is a drop in the bucket,” said Keith Ferley, a broker with Union Securities. “We’re waiting to see what happens in the U.S. …. If they (soybeans) come in at 41 bu. per acre, OK, we’ve got enough beans. If they come in at 39 (bu. per acre), oh boy, things are going to be tight.”
Unless there is an early frost in the Midwest or some sort of weather wreck in the next few weeks, Ferley expects that “canola will continue to drift lower.”
While that may not be good news for canola growers, Brenda Tjaden-Lepp, co-founder of FarmLink Marketing Solutions in Winnipeg, said lower prices help long-term prospects for canola demand.
“Some of the big importers, China, Pakistan … this is typically the window (in fall) where they come to Canada for a lot of purchases. The cheaper it looks to them right now, especially next to soybeans, the better,” she said.
When canola is above $650 per tonne, like it was earlier this year, it can scare off buyers, she said.
“The longer we stay below $600 per tonne, the more excited I am about price potential later on in the year.”
Another factor to consider when it comes to canola demand is the currency, Ferley said.
“If the Canadian dollar starts to drift back down, that’s supportive too (for canola).”
Besides the record crop for canola, Statistics Canada is also predicting that wheat production should be significantly higher this fall.
It expects a total wheat harvest of 25.4 million tonnes, up 26.8 percent from 2007. Durum and winter wheat will see the largest increases, with durum soaring to 4.9 million tonnes, compared to 3.7 million last year.
The gain in winter wheat production is even higher, going to 4.2 million tonnes this year from 2.5 million tonnes in 2007. That’s a gain of 67.7 percent across the country.
Maureen Fitzhenry, Canadian Wheat Board spokesperson, said winter wheat is gaining ground in Western Canada, with seeded acres last fall up 39 percent from the previous year.
She noted that the increase is not based on demand, but on producers’ agronomic decisions.
“They’re finding that winter wheat works very well with their rotations,” she said. “So when you have a fall where you’ve got a relatively early harvest, there’s time to turn to winter wheat seeding.”
Fitzhenry added that the CWB has witnessed rising popularity for winter wheat over the last few years, but the crop does depend on an early harvest. A later harvest, which is expected this fall, may cut into next year’s production.
