It seems like the world can’t get enough oilseed.
Prices of canola and soybeans fell along with every other commodity caught in the global financial meltdown of 2008-09, but global economic turmoil has not touched oilseed demand.
Canada produced a record canola crop in 2008 and is on its way to a record year for exports and domestic use. Canola exports are up 28 percent over last year at this time.
Exports of American soybeans are up 12 percent over last year, thanks largely to a 47 percent increase in exports to China.
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The situation caused Thomas Mielke, publisher of the influential oilseed market publication Oil World, to predict in January that stocks of all world oilseeds – including soybeans, canola, palm, cotton and sunflower – would recover only slightly by the end of 2008-09 after an 11 million tonne drawdown the year before.
That prospect has changed and stocks may be tighter now that drought has reduced South America’s soybean crop.
Rain in early February helped stabilize Argentina’s crop, but the U.S. Department of Agriculture attache in Argentina estimated the crop would fall to 42.5 million tonnes, down from an earlier forecast of 49.5 and last year’s 46.2 million.
Brazil is also expected to produce fewer soybeans than originally thought. So the world’s soybean stocks will be tight entering 2009-10.
Oil World expects global canola stocks will be up from 2007-08, but the stock-to-use ratio of about 13 percent will still be tight in an historical context. Tight stocks will support the new crop price.
Analysts expect U.S. soybean acreage will rise and corn area will shrink, but earlier predictions of large swings are being scaled back. High fertilizer prices were bad news for corn, which uses more fertilizer than soybeans, but fertilizer costs have come down.
As well, the price spread between the two is now almost neutral, so the increase in soybean area might be modest.
Agriculture Canada has an early forecast of a four percent increase in canola area to 16.8 million acres. Private forecasts call for a similar increase.
Ukraine will also likely increase canola production. It jumped to 2.9 million tonnes of production in 2008 from almost nothing three years earlier. The country sells most of its seed to Europe for biodiesel.
