The U.S. Department of Agriculture is forecasting 16 million tonnes of Canadian canola production, down 4.2 million tonnes from its July estimate.
It is the first major agency to slash production projections for the crop.
Agriculture Canada pegged the crop at 19.89 million tonnes in its July 20 outlook. Its next forecast will be released on August 20.
The International Grains Council recently tweeted that Canadian canola production will be little changed from last year’s 18.7 million tonnes despite worsening drought due to a three-year high in plantings.
But according to the United States Depart of Agriculture, production and yields will be 20 percent below the five-year average. It is forecasting an average yield of 32.8 bushels per acre.
The USDA said satellite-based maps show the vegetative health of the canola crop has “deteriorated substantially” due to abnormally hot temperatures and below normal precipitation.
Conditions are approaching those not seen since 2003.
“Early crop maturation, uneven development, stunted plants and empty or missing pods are common,” stated the USDA.
Grower groups and government officials in the three Prairie provinces are forecasting a 10 to 20 bushel per acre reduction in average yields, resulting in a five to 10 million tonne drop in production.
That is in line with the USDA’s forecast.
Another corroborating factor is a rumour circulating that Canadian canola processors and exporters are sourcing supplies from competing countries due to expectations of a short crop at home.
Sergei Feofilov, chief executive officer of UkrAgroConsult, said his clients are telling him that Canadian firms have already booked 50,000 tonnes of Ukrainian canola for delivery.
That is a highly unusual situation for the world’s leading exporter of the crop.
Josh Lawrence, a consultant with IKON Commodities in Australia, said Canadian canola prices are at such a huge premium to the rest of the world that on paper it looks like even Australian canola would be competitive at the Port of Vancouver.
But Australia is pretty much out of supplies until the new crop comes off in November and December.
“We are down to the bare end of the cupboard until we refill in our next harvest,” he said during a webinar organized by UkrAgroConsult.
Lawrence said it is extremely rare to see Canadian canola selling at prices so far above competing markets, a sure sign that exporters are attempting to ration demand.
Australia will be able to absorb a larger-than-usual portion of that global demand this year.
There was a big increase in acres Down Under due to high prices and good rainfall. Yield potential is terrific due to the moisture conditions.
“We’re about halfway through our growing season and things are looking absolutely fantastic,” he said.
IKON is forecasting 5.3 million tonnes of production, up from last year’s record crop of 4.7 million tonnes.
Australia typically produces about three million tonnes of the crop and consumes one million tonnes, exporting the remainder.
So exports should be at least two million tonnes higher-than-usual this year. Most of that will go to the European Union but the country also ships to Asian markets like China, Japan and Malaysia.
The bulk of Australia’s crop is shipped out between January and June every year.
“Our shipping window for canola is very front-loaded,” said Lawrence.
Ukraine is Canada’s other main competitor in export markets. Feofilov is forecasting 2.75 million tonnes of production, which would be the same level as last year and tied for the third largest crop on record.
Area declined a lot due to drought at seeding time last fall but yields are expected to be 30 percent higher than 2020, offsetting the acreage reduction.
Harvest has been delayed by rains so Ukraine’s exports are off to a slow start. The country shipped out 43,000 tonnes in July versus 230,000 a year ago.
Feofilov expects monthly totals will be higher than normal for the remainder of the main shipping season, which runs through December. He is forecasting 370,000 tonnes in August.
An estimated 90 percent of Ukraine’s exports are to the European Union but Pakistan has already purchased 32,000 tonnes this year, which is a surprise.
He is forecasting strong competition between the EU and China for the smaller-than-usual global supply of the crop.
“Both destinations are eager to buy (canola),” said Feofilov.
Ukraine’s current price is about US$630 per tonne FOB. But he expects farmers to hold out for prices of $700 to $740 per tonne picked up on the farm.
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