After a year when canola was one of the few money-making crops, analysts are starting to predict a large increase in acres for the spring of 1999.
Paul Cassidy, president of Calgary’s Mitcon Inc., estimated farmers could plant 15 percent more acres to canola next year and churn out more than eight million tonnes.
Farmers should look at locking in up to a third of their expected 1999-2000 crop at prices above $8 per bushel, said Cassidy, because he thinks prices next year will be lower.
Basis bids in Alberta and Saskatchewan for the crop are higher than the five-year average, he said.
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Cassidy spoke at a recent outlook conference held here by the George Morris Centre, based in Guelph, Ont., and the Bank of Montreal.
Growing competition from Australia is one reason Cassidy believes prices will fall. Starting in January, growers there will start to bring a record crop of 1.6 million tonnes to market. The country is already sold out of canola with forward sales to Japan and China.
Next year, Cassidy anticipates Australian farmers will plant even more of the crop. More than 40 percent of Australian producers have locked in prices for their expected production using Winnipeg futures.
Cassidy noted that Chinese demand has helped keep canola prices strong through this fall. But three years ago, the country didn’t buy any canola from Canada, he said.
“Do you know with certainty it (Chinese demand) will be here next year?”
Cassidy projects Canada will export 3.35 million tonnes of canola, more than 13 percent more than last year. He estimates a crush this year of 3.5 million tonnes.
Farmers have fed the demand by delivering almost half the crop to date, he said.
But farmers have been hesitant to sell flax, he said, even though they have lots of it and there’s reasonable demand.
Once the St. Lawrence Seaway closes for the winter, he thinks prices will drop by $20 to $25 per tonne.
American crushers won’t buy as much flax as usual because farmers there grew a record flax crop and a large yellow mustard crop.
Canada’s ending stocks will increase this year to close to 200,000 tonnes, said Cassidy, almost twice the tight carryout seen in the past two crop years.
In 1999, Cassidy thinks farmers will plant less flax, although supplies will be ample. He recommended farmers price up to 20 percent of their expected new crop on rallies.
