With the rally in the wheat markets this summer, canola’s star status in the commodity firmament has been somewhat dimmed.
But that doesn’t mean the crop still isn’t a big part of most farmers’ mix this year. Acreage is still the second largest on record, at a little better than 13 million.
To rectify that, let’s look at the factors to watch for through the fall in the canola market.
Most analysts and commodity traders are estimating total Canadian canola production will come in between 6.1 and 6.5 million tonnes, said Lyndon Peters, oilseeds specialist with Agriculture Canada’s grains policy directorate in Winnipeg.
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While that’s less than 1994’s record crop, it’s still ample to supply Canada’s regular customers like Japan and the United States,
he said.
It also leaves some room to sell to value buyers, like the European Union and Mexico, provided Canadian prices are competitive.
On the supply side, the U.S. is likely to harvest an average, not a bumper, soybean crop. Added to European production, that still makes the overall world oilseed picture relatively tight, he said.
And that assessment doesn’t take into account the very real prospect of sporadic buying from two of the world’s largest consumers of oilseeds – China and India.
Peters is looking for the nearby futures prices in Winnipeg to trade between $380 and $420 per tonne.
Besides watching the demand side of the market, Peters is also going to be watching soybean oil futures in Chicago.
He said the United States department of agriculture has predicted the nearby soyoil futures market will trade between 24 and 29 cents (U.S.) through to the end of June next year.
The midpoint of that range is 26.5 cents, Peters said, which compares favorably with 1994-95’s average of 27.25 cents.
Greg Kostal, analyst with the United Grain Growers’ Grower Marketing Service in Winnipeg, is looking for canola to adhere more tightly to its normal seasonal pattern this fall.
That means harvest, once it gets going, should put some pressure on prices.
Kostal said farmers should be aware those lower prices could be driven by either a lower futures market or a widening basis.
That, plus the prospect of paying full freight in a post-Crow rail environment, makes it even more important to be “basis smart,” Kostal said. Farmers should shop the crushers for bids.
