WINNIPEG – Japanese canola buyers got the cold, hard facts July 24 about Canadian canola supply for the upcoming year.
And as they returned home from an annual visit with members of the Canola Council of Canada, some in the trade believe they may warm up to buying more canola in advance than usual.
George Powell, oilseeds manager for Continental Grain, said the council explained to the 27 buyers and government officials that 1997 carry-over stocks would be the third-lowest in the past 15 years.
To ensure ample supply for domestic and export demand, Powell said Canada needs more than six million tonnes of production. However, the canola council projects only 5.3 million tonnes of the seed this coming crop year.
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Kohji Kawa, the managing director of Nisshin Oil Mills in Tokyo, said after the meeting he is now prepared to see one of the tightest supply situations ever.
“We sort of renewed our awareness that the situation is indeed very severe, … in fact more severe than we had expected and we will therefore be going home with a sense of crisis,” said Kawa through an interpreter.
Kawa said companies expect their demand to stay constant this year. During the past decade, the country has bought an average of 1.7 million tonnes of canola per year.
But this year, “the price factor as well as export availability … may affect the actual outcome,” he said.
Powell, who is also chair of the canola council, said in an interview the Canadian trade is also worried about supply.
Limited supply
He said while canola will fetch strong prices because of the smaller supply, not all customers will get what they need at prices they can afford.
“As a supplier, you don’t like seeing this, because you’ve built up this demand over the years. They’re an honest, steady customer,” Powell said.
Japanese companies generally buy canola three months ahead of when they need it. This year, that strategy could be risky, Powell said, because the longer they wait, the higher prices could be.
“I would expect some of them will change,” he said. “They may buy a little further forward” to ensure supply.
Powell noted the canola council’s numbers are projections, since the crop is still in the ground, and the actual situation could be different.
Increased Canadian crushing capacity of 3.7 million tonnes will be one wild card for the upcoming year.
Powell said the industry doesn’t expect domestic plants to operate at full capacity. But if profits are good, it could make the tight situation even tighter.
China could also play a role because of major floods and poor production, Powell said.
“We’re not even factoring them into the equation right now and the Japanese are worried about that.”
Crop projections
Canola Council projections for 1996-97 crop:
1996 carryout: 900,000 tonnes
1996-97 production: 4.75 million tonnes
Domestic crush demand: 2.75 million tonnes
Seed waste and dockage: 375,000 tonnes
Export demand: 2.26 million tonnes
1997 carryout: 350,000 tonnes
Source: Canola Council of Canada
