PUERTO VALLARTA, Mexico – A presentation on the world oilseed supply and demand outlook left Beiseker, Alta., producer Kenton Ziegler in a cheerful disposition.
“For the first time in the last 10 years I feel like not only will canola go up, but I think all grains are going to benefit from this tight squeeze,” said the chair of the Alberta Canola Producers Commission.
The outlook delivered at the Canola Council of Canada’s 37th annual convention filled him with optimism about the coming crop year.
“There’s a potential for a squeeze between the amount of grain that is available, particularly soybeans, and what is needed. So there could be some very volatile markets this coming summer.”
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Ziegler was reacting to a speech delivered by Dennis Maxfield, owner of The Trade News Service, an on-line newsletter reporting on the fats and oils trade.
Maxfield told the 157 delegates and invited guests attending the convention that the United States Department of Agriculture March projection for world oil-seed production of 343.6 million tonnes is overstated. Production problems with the South America soybean crop should reduce that number by as much as nine million tonnes.
“It is becoming increasingly apparent that the United States Department of Agriculture has overestimated the size of the crop.”
That is particularly so for Brazil.
“Within the past two weeks alone the Brazilian state of Parana, the country’s second largest producing state, cut its crop estimate by 14 percent to 10.2 million tonnes from an initial estimate of 11.8 million tonnes.”
A few days later analysts cut production in Rio Grande do Sul, the country’s third largest soybean producing region, by 27 percent.
“In just those two states alone we have a reduction of 4.2 million tonnes.”
With further losses expected due to Asian soy rust, Maxfield believes the Brazilian crop will come in as low as 54 million tonnes, down seven million tonnes from the USDA’s February forecast.
Two weeks ago, Argentina’s agricultural secretariat also sliced its soybean production estimate to 34.5 million tonnes, down two million tonnes from the most recent USDA forecast.
“Add up these two factors, a shorter than expected crop in Brazil and the possibility of the same for Argentina, together with an already tight U.S. crop, world soybean supplies could easily fall below the 196.8 million tonnes on hand a year earlier. In other words, things are already tight and they’re going to get a lot tighter.”
Maxfield expects bigger canola crops in Canada, China and India in 2004. But he also expects strong demand from the Canadian crushing industry and from importers such as Japan, Mexico, China, Pakistan and Iran.
“That will trim (Canadian) stocks at the end of July of this year to just below the current estimate of 800,000 tonnes.”
Global canola stocks will also remain “relatively tight” in 2004-05, rising to around 2.01 million tonnes from the 1.77 million tonnes projected for the end of the current crop year.
He told council delegates the steady growth of the world’s population, combined with the relative weakness of the U.S. dollar against most foreign currencies, will continue to spark export demand for oilseeds and their related products.
Exports of the major oilseeds will be a record 76 million tonnes in 2004-05, more than double the amount shipped 10 years ago.
World oilseed crush is also expected to reach a record 287.7 million tonnes, with “a good portion” of the increase coming in the form of canola and rapeseed.
Global oilseed stocks at the end of this crop year are forecast to tumble to 32.7 million tonnes, well below the USDA’s most recent estimate and the tightest level since the 1998-99 marketing year.
The only cause for concern is that any hint of drought in the U.S. will drive up soybean prices and buyers will switch to cheaper substitutes.
