The sea of canola beginning to flower across the Prairies is taking what little bloom there was off canola markets.
That’s because it’s quite a bit bigger than what market analysts expected.
The latest Statistics Canada survey revealed farmers ended up planting about 850,000 more acres of canola than they originally anticipated would go in the ground.
The agency’s first survey of the year, taken at the end of March, showed farmers intended to seed almost 11.3 million acres.
Market analyst Mike Jubinville of Pro Farmer Canada explained farmers were likely drawn back to the crop by a rally in canola prices that lasted from April until mid-May.
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At that time, farmers could have locked in prices in the $6 to $6.25 per bushel range, said Jubinville.
Nolita Clyde, canola analyst with Statcom Ltd., wasn’t completely surprised by the increase.
“I thought we bought acres (with the rally), but I didn’t think we bought quite that many.”
Jubinville said he thinks it’s unlikely many farmers found the April-May prices enticing enough to lock in. But he said farmers may have had the impression prices would continue to improve.
In fact, he sees little reason for canola futures to rise above $300 per tonne this year.
Farmers have an all-time record amount of canola from last summer’s crop still in their bins, he noted.
Huge carry-out
Jubinville expects 2.1 to 2.3 million tonnes of old crop canola will be held over until the new crop year.
“It tells me that canola next year is just going to be operating in a surplus environment,” he said.
He thinks up to 1.7 million tonnes of canola could be left over at the end of 2000-01, making it the second-largest carry-out on record.
The market needs some big sales to China, said Jubinville.
Last year, Chinese buyers scooped up 3.9 million tonnes of canola from Canada, Europe and Australia. The year before, China bought 2.15 million tonnes.
But Clyde said a clear forecast of Chinese demand for 2000-01 remains elusive. Exporters have a wide range of outlooks, said Clyde, ranging from one million to three million tonnes.
It’s hard to predict what the country will take because it does not have established buying patterns. Reliable statistics about the country’s supply and demand are hard to come by.
One thing is clear, said Clyde: “We need to get our prices lower and buy demand.”
Canadian farmers, unsatisfied with price levels, have kept a stranglehold on the old-crop canola in their bins.
“The last thing we need is for the farmer to keep storing it.”
Grain companies have been hesitant to book sales because farmer deliveries have been slow, Clyde explained.
Exporters worry they’ll have to pay up to pry seed from farmers to meet any sales they put on the books.
“We’re not sitting in a very good place at the moment.”
The Statistics Canada report had little immediate effect on canola futures prices at the Winnipeg Commodity Exchange.
They actually moved higher the day of the report because of upward movement in the market-leading soybean futures complex at the Chicago Board of Trade. They fell later in the week.
Farmers should be on alert for weather scares during July, or for pricing opportunities spurred by Chinese sales, said Jubinville.
“When this occasion comes, I think we have to move.”
Price rallies won’t be huge. He expects futures prices will trade within a narrow range of $30 to $50 per tonne for the upcoming year.
But when November futures prices hit $285 to $290 per tonne, he recommends farmers take a serious look at pricing some crop.
“We don’t have a buyer that’s going to chase it above (those levels),” said Jubinville. “The world is awash in vegetable oil products.”
