As they drive up and down the long, straight rows in their fields, farmers planting canola are likely cursing if they are counting on it to help pay the bills for the new crop year.
Prices for the coming crop continue to sink like a stone.
Canadian farmers aren’t alone in their sentiments about the oilseed. In Europe, China, Australia and the United States, farmers are growing more canola, and are watching prices fall.
Global canola stocks will be much higher this year, said Todd Busby, an analyst with Mitcon Inc. in Calgary, and there won’t be enough demand to consume all of the crop.
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Many in the trade are forecasting Canada will have a one million tonne carryout at the end of 1999-2000, a level not seen since 1995-96.
Canadian producers “need to wake up to the fact that cheap can get cheaper” and manage their risk, said Busby.
All signs are pointing down for canola prices, he said, a trend that won’t reverse unless bad weather takes a big bite out of the crop.
“The only saving grace will be a crop problem somewhere,” said Busby. “Let’s just hope it’s not here.”
In fact, recent wet weather and seeding delays across the Prairies may lead to farmers planting more canola, Busby said. Some varieties can be planted later than wheat, and do well in wet soil.
Nolita Clyde, analyst with Statcom Ltd., said the huge canola crop faces stiff competition from increased production of other oilseeds around the world.
During the past few years, canola has traded somewhat on its own from the oilseed complex. But this year, it will compete directly, said Clyde.
She is bearish about new-crop prices, unless there is unexpected demand, like the kind that came from China last year.
“That’s kind of unlikely,” she said, “although you never know with China.”
Last year, China sailed in to buy 1.25 million tonnes of canola from Canada, rescuing market prospects, said Busby.
“I would have hated to see where canola prices would have been,” he said, adding he’s not counting on big Chinese demand this year.
While Canada had record production, it also had close to record consumption from crushers and exporters.
“I don’t think that can be experienced next year.”
Even at current levels, which are failing to attract sales from farmers, Canadian canola is overpriced compared to other sources.
Canola from the United Kingdom has a slight price advantage for Japanese and Chinese buyers compared to canola through the port of Vancouver, according to Statcom estimates.
European old-crop canola shipped through Baltic ports or the United Kingdom is priced cheaper into Mexico, Japan and China than Canadian canola.
Eastern Canadian crushers can import old-crop canola from the Baltic as cheaply as they can from the Prairies.
Clyde said there has been little action in either old-crop or new-crop markets because farmers are holding onto canola in their bins, and aren’t anxious to price new crop.
New-crop bids at elevators have ranged from $6.10 to $6.35 per bushel.
“I think you will see more selling in June and July as the reality of lower prices set in,” she said.
