Reduced competition | Ukraine and Australia exports will be down
Sales prospects are good for new crop canola given the expectation for a strong export program combined with a smaller than anticipated carryout from the 2013-14 crop, says an analyst.
Canola prices this autumn could be steady to stronger, but much will depend on how the market reacts to a potential huge U.S. crop.
Importers have already purchased a sizable portion of the 2014 canola crop for the fall-to-December delivery period, said Brian Voth, senior market coach with Agri-Trend Marketing.
“There is probably somewhere in the neighborhood of about four to 4.5 million tonnes already sold on the new crop canola side, which I would guess is probably going to be half of this coming year’s export number,” he said.
Voth said that shows restored faith in the transportation system by buyers and grain companies.

Much of the demand is stemming from China because canola is competitively priced compared to soybeans.
“There is a lot of demand,” said Voth.
“I also think that last year’s carryout is substantially lower than a lot of people think it is.”
Agriculture Canada’s July forecast was three million tonnes of canola carryout from the 2013-14 crop. Voth believes it will be closer to 1.75 million tonnes because he doesn’t think growers harvested the bin-busting 18 million tonne crop reported by Statistics Canada.
“Have you talked to anybody who knows where they can find canola? Because I haven’t,” he said.
Statistics Canada will release its July 31 stocks report on Sept. 5. That may shed light on the carryout situation.
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Voth predicts growers will harvest 14.5 million tonnes of canola this year. He is forecasting 8.5 to nine million tonnes of exports and seven to eight million tonnes of domestic crush.
“That means we’re going to be in a pretty tight situation on canola again by the end of this crop year,” he said.
“I’m looking at total supply of 16.5 million tonnes tops and looking at a total demand number of 16ish. That’s why I say it could be very tight by the end of this crop year.”
He believes a lot of market participants are operating under the mistaken belief that there is 2.5 to three million tonnes of carryout from the 2013 crop.
The other good news is that Canada may be facing reduced competition from other suppliers.
Reuters reports that Ukraine’s rapeseed exports will fall by 17 percent compared to last year due to a smaller harvest.
Nick Goddard, executive director of the Australian Oilseeds Federation, said the federation is rethinking its June estimate calling for a 3.9 million tonne canola crop due to extreme dryness in northern New South Wales.
“In our next crop report, we will probably come back five to six percent to take account of this. Industry consensus is now around 3.5 to 3.6 million tonnes,” he said in an e-mail.
Goddard also noted growers are heading into a potentially drier than average spring due to El Nino.
Voth believes there is room for canola prices to improve but he doesn’t know if that will happen through better futures values or stronger basis levels.
He will watch intently to see how the market reacts when soybean prices tumble as the massive U.S. crop hits the market. Voth believes there is another $1 or $1.50 per bushel downside for soybeans.
“If canola were to keep dropping with the soybeans then I think basis has a lot of work to do,” he said.
Basis levels have already improved to the point where they are $8 to $10 per tonne over fall futures prices.
His hunch is that the price action may be in the futures markets.
“I think you could probably see the soybean and the canola futures diverge where you could see downside in soybeans and see canola stay flat or even rally,” said Voth.
He plans to monitor early canola yields to see how big this year’s crop is going to be because that could have a big impact on prices.