In the past year, oilseed prices have scraped along market lows.
But the editor of Oil World thinks oilseed markets will take a turn for the better.
Thomas Mielke told last week’s GrainWorld conference that he believes the soybean market will move moderately higher during the next six months.
He expects canola prices to follow, although they will remain at a considerable discount to soybeans because of large world supplies of rapeseed and canola.
“It has been quite an interesting year and I think there are very good opportunities ahead for the coming 12 to 24 months.”
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Mielke explained canola has traded at unusually wide discounts to soybeans because of huge world stocks. In 1999-00, almost all major canola and rapeseed producers boosted area and benefited from above-average yields, he said.
Canola and rapeseed production rose 16 percent to 41.7 million tonnes.
But world consumption rose too. Mielke forecasts consumption of 40.1 million tonnes for the current crop year, up from 34.8 million tonnes in 1998-99.
“The demand has really picked up strength,” he said.
However, world stocks going into the new crop year will rest around five million tonnes, said Mielke, up 47 percent from last year.
Canadian ending stocks will rise three-fold to 1.9 million tonnes, he said, noting some Canadian analysts expect an even larger carry-out number.
While Canada remains the world’s largest canola exporter, it has lost market share, he said.
Three years ago, Canada held 70 percent of the export market. This year, it was squeezed to 45 percent, while competitors in Australia and Europe expanded their reach.
Canadian crushers have not been happy with their market prospects lately, said Mielke. He pegged the 1999-00 crush at three million tonnes, at most. That’s the smallest crush in three years.
But he thinks canola prices will gain some ground before the new crop year begins.
Mielke expects world canola production to drop in the coming year. Canadian farmers will cut back by 10 to 15 percent, he said.
“The expectation of lower production will help to stabilize prices.”
Meanwhile, he sees soybean stocks declining in the face of strong demand.
“The soybean cycle has changed,” he said. “Soybeans are becoming more friendly.”
Mielke said he thinks recent American government new-crop soybean forecasts are too large.
He also expects palm oil production to drop early in 2000.
Chinese oilseed imports will continue to grow, he said.
“Whoever tells you that the world demand is poor, just look at what’s happening in China: It’s very dynamic.”
The world is consuming more oils and fats.
“At the current low prices, additional demand has popped up,” said Mielke, pointing to the European market for rapeseed-based biodiesel as one example.
Mielke expects Canada to carry 450,000 tonnes of flax into the new crop year because of a disastrous export season. European flax buyers cut back because of large flax crops.
