Crushers are continuing to gobble up canola at a record pace. Exporters are hungry for it too.
Farmers with canola in their bins should open them up and feed the demand, says the general manager of oilseed trading for Canada’s largest crusher.
The global vegetable oil market has been healthy, said Rick Watson of Canamera Foods, in an telephone interview from his Oakville, Ont., office.
Malaysia’s palm oil production has been hurt by drought and fires. Indonesia has banned exports of the oil altogether.
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The Canadian dollar has gone through a dip that lowered the price of canola seed in foreign currencies, explained Watson. This attracted new demand from countries like South Africa.
Japan and Mexico picked up the pace of imports. And China, which hasn’t bought canola seed since 1994-95, was back in the market.
Now that the dollar is moving up, Watson isn’t sure importers will be able to buy canola at the same rate.
“Because we’ve maybe had a flurry of demand in November through January, we’ve maybe outpriced canola from the global marketplace a little bit.”
Soybean futures in Chicago have declined by almost 50 cents a bushel, while canola futures in Winnipeg have stayed “stubbornly high,” noted Watson.
Meal markets have been poor because of the Asian currency crisis, and a large soybean crop from South America is poised to come on the market.
“Our views are that a producer should take advantage of this latent strength … and do some selling here through the spring months.
“If they try to hold out for a premium in the summer, they will have missed all the opportunities,” he said, explaining crushers will either have supplies by that time or will shut down for annual repairs and maintenance.
While the oil market has been strong, crushers all over the world have been feeling pressure from weak margins.
“There may be just a need for crushing companies to take downtime just because the demand isn’t there to satisfy the oil and meal globally,” Watson said.
“Although expectations were high for a strong market, global demand is really down a notch and it’s really due to the collapse of the Asian, Pacific Rim countries.”
Crushers make their sales two to three months ahead of time, Watson explained. If demand declines at the same time as farmers become less willing to sell, crushers may step away from the market and slow down production or temporarily close plants.
“Then what happens is the market collapses and it goes down $50 a tonne on the seed value, and you can’t find a buyer because we’ve missed a market and you can’t go back and get it back,” said Watson.
