The continued wetness in the Midwest, which has delayed corn planting, plus increasing reports of dryness in Canada, has pushed canola markets slightly higher in recent days, according to Barry Coleman, executive director of the Northern Canola Growers Association.
This has raised local crush plant prices to a range of $14.92 to $15.27 a hundredweight (cwt), which is 30 cents off from recent lows. In addition, canola future prices are now at $450 a ton – a $20 increase since the first part of May.
“Some marketers are now saying growers should consider using this rally as an opportunity to market out some old crop canola,” Coleman said.
Due to the shutdown of Canadian canola purchases by China, it’s still estimated there will be record canola carryout in Canada of 5.3 million tons by the end of the current marketing year, which will be more than double the previous 5-year average, according to Coleman.
“Total canola exports are forecast at only 8 million tons, which compares to 9.3 million tons in the current marketing year,” he said. “Current high ending stocks are expected as well as for next year. As a result, the canola markets won’t be able to sustain any rallies in the foreseeable future until there is a major oilseed wreck somewhere in the world or the China trade situation gets fixed.”
The recent USDA oilseeds report indicated canola imports from Canada into the U.S. could be up this year by 46 percent as crushing demand in the U.S. accelerates this year, and that is mainly coming from the return to trend line yields this year in the U.S. after the above average domestic canola crop last year.
That same report said the European canola harvest this year will be at a seven-year low, thus requiring a 7 percent increase in canola imports to meet demand. But there is a bigger Ukraine canola crop and that may mitigate the EU supply deficit. Coleman also noted that Ukraine has now surpassed Australia as the second largest canola exporting country in the world.
The USDA world oilseed report also projects the Chinese canola crop to be down this year, however they expect the production in Australia to fill any void in China. It is also reported that China has increased imports of canola oil and meal imports since the restriction on the purchase of canola seed from Canada, however, some of the increase oil and meal imports are actually coming from Canada.
Finally, crush reports out of Canada report near capacity production at the crushing plants, so the crushing part of the canola industry is doing its part to consume the canola supply.