Farmers’ fields have the largest potential canola crop ever grown in Canada, waiting for sun and heat to push it to maturity.
The oilseed needs high yields to help offset prices, which are much lower than last year.
“When you have a supply this big and demand is weak, especially in the oilseeds, which have been a prime generator of cash flow the past few years, it can get pretty ugly this fall,” said Ian Morrison, grains and oilseeds market analyst with Agricore.
Statistics Canada last week released its July production estimates, showing a canola crop of 8.2 million tonnes, up nine percent from last year’s record crop due to strong yields.
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“There is a swack of canola out there,” said Errol Anderson of Pro Market Wire Report.
“The bottom line is we are going to carry out a bunch of canola this year because our exports are going to be down.”
He expects the year-end carryout will be a million tonnes, compared to a forecasted 450,000 in 1998-99.
Last year, unexpectedly strong exports of about 1.3 million tonnes to China helped buoy prices despite a big crop.
But this year, Anderson expects China will buy only about half as much. And it will demand favorable prices.
“China has flat out said: ‘Get your November (contract) price down $20 a tonne and we’ll talk,’ ” Anderson said.
Morrison said the export market will be crowded.
“We are going to have a record canola crop in the world this year at 40 million tonnes,” he said.
“China is going to be importing seed from Europe and Australia and us. We have some competition out there and so we think prices have to head lower.”
There will also be strong competition from other vegetable oils such as soy and palm.
Morrison said there are two reasons canola yields are finally up after years in the doldrums.
Except for the southern Manitoba-Saskatchewan border area and the Alberta-British Columbia Peace River area there has been generally good weather, he said.
Also, the second generation of herbicide-resistant canola varieties, with greater yield potential, hit the seed market in a big way.
Statistics Canada estimated the Western Canadian barley crop at 11.7 million tonnes, about the same as last year.
Anderson said the country carried close to three million tonnes of feed barley into this crop year. The carryover could grow to nearly 3.5 million tonnes at the close of this crop year.
Morrison said a small calf crop and the financial squeeze resulting from the American anti-dumping duty on live cattle will limit demand from feeders.
The feed barley price will continue to slide through harvest.
Canadian oat production is down according to StatsCan, but that won’t boost prices much because the main export market, the United States, continues to import subsidized European oats.
Anderson advised farmers to sell some grain whenever the markets rally, despite the low prices. Feed grains in particular should be moved because at times space for them will be limited.
