Farmers have taken off the biggest canola crop ever and placed it into a market made jumpy by unprecedented global financial pressures.
But analysts say strong demand has made the crop a star in a sea of losers this fall.
Canola prices have fallen from last year’s levels and tumbled somewhat since spring. Yet analysts report it is still helping farmers pay the bills.
“The oilseeds have become very, very important for cash flow this year,” said Dave Reimann of Growers’ Marketing Services.
Read Also
Europe holds promise for Canadian lentils
Pulse Canada is trying to help boost lentil consumption in Europe, which is already the fourth largest market.
“They are the only thing that’s giving any sort of decent return at this point.”
Last week, Statistics Canada surprised market watchers who expected the agency to adjust mid-summer production estimates lower.
Instead, it said farmers pulled off a record-breaking crop. While average yields were down in Saskatch-
ewan because of drought, good yields in Manitoba and Alberta offset the losses.
The confirmation of big supplies was overshadowed by other positive factors affecting prices.
“I’d say overall, (the market) is stronger than we anticipated,” said Chris Beckman, analyst with Agriculture Canada.
World vegetable oil prices are strong, while protein meal prices are weaker, said Beckman. This relationship favors canola, since it produces 40 percent oil, compared to soybeans that produce about 80 percent meal.
Mike Jubinville, analyst with Pro Farmer Canada, said demand from crushers and exporters is moving at a potentially record pace to gobble up the record supplies.
Crushers can make money at current exchange rates and seed, oil and meal prices. Exporters have a large program booked through to December, he said.
One day last week, Japanese buyers priced 30,000 tonnes of canola when the yen rocketed up, giving importers more buying power.
Currency fluctuations are partly behind the $20 per tonne jumps in nearby canola futures prices witnessed during the past few weeks, said Reimann.
“They’ve been pretty wild markets lately and that’s causing a lot of people to jump on and off bandwagons from one day to the next,” he said.
In the weeks before the Thanksgiving long weekend, November canola futures touched down to the $350 per tonne range and bounded up above $371 per tonne.
Beckman said Japan’s moves toward economic reforms should bode well for its currency and canola prices.
“It looks like they’re going to start getting their house in order,” he said.
“So what that does is kind of
reinstil faith in Japan, and they’re regarded as a spark plug for the Asian region.”
Strong palm oil prices have also been helping canola prices. Indonesia, a major palm oil producer, has had a 60 percent export tax on its oil because of its economic problems.
“That one tax has a large effect on prices.”
Beckman also forecasts another record year for Canadian crushers. He thinks they will crush 3.45 million tonnes of canola, compared to last year’s 3.24 million.
Agriculture Canada expects average canola prices this year to be in the $370 to $400 per tonne range basis Vancouver. Last year, the average price worked out to $420 per tonne.
“It’s off some from last year, but compared to other crops, it’s still strong,” said Beckman.
