Canadian commodity traders reacted with a yawn to Statistics Canada’s November crop production report issued last week.
The report increased estimated canola production for 1996-97 to 4.991 million tonnes, up about 60,000 tonnes from the September estimate. But the market shrugged the information off, partly because traders questioned its accuracy.
“There are questions about how much is left (unharvested) out in Alberta, across Canada how much is swathed, is combined, how much isn’t combined,” said Grant Brown of Linnco Futures in Winnipeg.
Errol Anderson, manager of Palliser Commodities in Calgary, said the market is focused on international demand.
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“Our supplies are down on the canola side (compared to last year) and we have to look toward demand overall.”
Canola prices have also been supported by the drop in the value of the Canadian dollar, which topped 75 cents U.S. in mid November, but has now fallen back to 73.5 cents. Traders estimate a penny change in the loonie’s value affects canola prices by $8 to $13.
Mike Jubinville, of Growers’ Marketing Services, said he doubts the canola number will have sustained impact.
“It was bearishly construed in the short term, but I doubt it lasted 10 minutes,” he said.
Domestic demand
He noted the January canola futures contract price is higher than later months because of demand from crushers at home and the export market.
“That’s giving the signal that we need canola right now to satisfy immediate needs, so I think over the short term there are opportunities for the farm to do some pricing.”
Canola might be a little overvalued compared to soy and palm oil, but with the short-term demand, he thinks canola prices could sweeten a little more in December to attract farmer deliveries.
“If you see $9 a bushel I’d suggest you move. Not necessarily to empty the bin, because there might be decent opportunities down the road, but you’ve got to price small lots in rising markets,” he said.
The traders agreed that although Statistics Canada also reported a small drop in estimated barley production, it will do nothing to improve prices.
“We’ve got enough barley for 14 months and not a lot of growers have priced yet so we probably haven’t seen the bottom of the market until after Christmas,” Anderson said.
Statistics Canada also reported about 500,000 tonnes more wheat than the September outlook, thanks to an estimated record average yield of 36.1 bushels an acre.
If the yield is accurate, then the Canadian Wheat Board has a big job to avoid a large carryover of supply into the next crop year, Jubinville said.
He noted the initial price guarantee is close to the bottom end of the pool return outlook. This leaves little room to manoeuvre if world prices continue dropping.
Argentina, with a big crop and little storage space, is pressuring the market now with sales of cheap wheat, but once its crop has been sold, prices should stabilize, he said.
