Seed-starved canola crushers will increasingly look south of the border to keep their plants running this fall, say market analysts.
“We’re probably going to see pretty good imports from the U.S. this year from the crushers,” said Wayne Fjeld, oilseed analyst with Agricore.
Canola imports from the United States could climb as high as 400,000 tonnes in 2001-02, he said.
Agriculture Canada oilseed analyst Chris Beckman said the final number will depend on the size of the canola crop on both sides of the border.
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The Canadian crop is projected to decline by 32 percent to 4.8 million tonnes, while the U.S. crop is expected to be 1.1-1.5 million tonnes.
Imports from the U.S. in the current marketing year (ending July 31) will be around 250,000 tonnes, according to Agriculture Canada, up from 125,000 tonnes in 1999-2000 and 157,000 tonnes in 1998-99.
Most of the U.S. seed will cross the border in the fall, for two reasons.
First, American seed is generally harvested one to two weeks before Canadian seed, giving it a jump on the market.
Second, government payments provide guaranteed prices, encouraging American farmers to sell their crop right after harvest.
“That will give our crushers a good opportunity to meet their nearby needs,” said Fjeld.
That also tends to push the Canadian producer out of the market for several weeks in the fall, especially those who deliver to plants near the U.S. border, like CanAmera Foods at Altona, Man.
Even with U.S. imports supplementing the reduced Canadian crop, crushers are expected to process only about 2.4 million tonnes of seed next year, down 20 percent from this year and the lowest total since 1993-94.
Tight seed supplies will have to be rationed between the domestic and export markets, which could bode well for farmers.
“There could be a real battle going on as far as who gets the seed this year,” said Fjeld. “And any time you have two parties bidding and stocks considerably lower, it’s going to be good for the producer.”
He thinks new-crop canola could gain another $10 to $15 from the current November futures price of $320-$325 a tonne.
“I would not be an aggressive seller of new crop yet,” he said.
Beckman said exporters traditionally win competition for seed, since tariff structures in importing nations favor the import of seed rather than oil.
Bob Broeska, Canadian Oilseed Processors Association executive director, said crushers are in no position to bid up the seed price.
“The margins just aren’t there.”
Profit margins in the past year have been squeezed by low prices for canola oil and increased operating costs due to high energy prices. However, in the past couple of months canola oil has traded at a significant premium to soybean oil.
Those tight margins have led to temporary shutdowns at some crushing plants in recent months, and while they’re all running at the moment, Broeska said 2001-02 will be a struggle.
“The industry is running at slightly more than 50 percent of capacity, so they’re all turning a slow wheel, even if they’re running. That’s probably going to be the pattern for the next year and a half.”
Broeska said while farmers are understandably concerned about the price they get for their seed, it’s also in their long-term interests to have a viable domestic crushing industry in addition to the export market.
