WINNIPEG – Canada will have lots more canola to export in 1997-98, says a trader with Xcan Grain Pool Ltd.
But exporters may find themselves facing stiff competition, especially from European canola, said Joe Toens. As well, prices may have to drop sharply to attract buyers.
“European production is even bigger than Canadian production and is buying its way into traditional Canadian outlets, even into Eastern Canada,” he told Grain World, a market outlook conference.
He said cuts in European crushing subsidies in the last few years have opened the European Union market to Canadian canola but have also driven down European prices to world levels, which in turn has led to increased European exports of raw seed.
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While Europe is the only world market with excess crushing capacity, Toens said that given exchange rates, Canadian canola cannot compete in EU markets.
“There is, on the contrary, much room for Europe exporting their new crop, which will become available in shippable positions in July and August, into all destinations including Canada, at a discount of up to $30 (U.S.) per tonne to Canadian canola,” he said.
Xcan, the grain trading company jointly owned by the three prairie pools, is forecasting a 40 percent increase in acreage seeded to canola this year.
Supply/demand picture
Here’s the company’s forecast of supply and demand for 1997-98:
- Production will increase by nearly two million tonnes to seven million tonnes. Added to stocks of 368,000 tonnes leftover from last year and imports of 40,000 tonnes, that will produce total disposable supplies of just over 7.4 million tonnes.
- About 2.7 million tonnes will be crushed domestically, with another 870,000 tonnes going to feed, waste or dockage and 40,000 tonnes held for seed.
- In a supply/demand chart shown at the conference, Xcan lists exports at 2.4 million tonnes, the same as last year. That would leave carry-over stocks of 1.4 million tonnes at July 31, 1998, nearly four times the 1997 level.
“That can’t happen,” said Toens. “Canadian canola will have to find a home in the export market.”
However, he didn’t offer a forecast for the 1997-98 export total.
Toens said prices could rise over the next few weeks until the South American soybean crop is in the bins.
After that, new crop canola values will decline, perhaps by as much as $40 a tonne, to compete in world markets. However, old crop values could remain steady because of the tight carryout expected for July 31.
And he added that given relatively tight world stocks, any problems with the oilseed crops in South America, Europe, Canada or the U.S. could send markets much higher, “possibly dollars per bushel.”
