WESTERN PRODUCER — Canada’s canola exports will fall way short of Agriculture Canada’s forecast and that means increased carryout and pressure on prices, says an analyst.
Agriculture Canada is forecasting 9.3 million tonnes of exports in 2022-23.
That is not the number that PI Financial Corp. canola analyst Ken Ball is hearing when he speaks to commercial traders.
“Some of them are as low as six (million tonnes), some are seven to 7.5,” he said.
The reason for their pessimism is Australia’s monster crop. Farmers Down Under harvested a record 7.3 million tonnes of the oilseed, according to the Australian government’s latest estimate published on Dec. 6.
“Australian exports could hit six million tonnes this year,” said Ball.
“Believe it or not, Australian exports might almost equal Canadian exports this year for the first time in history.”
ProMarket Wire analyst Errol Anderson agreed with the premise that Canada’s sales will likely be disappointing in the second half of the marketing campaign.
“I don’t have a number in my mind on where the exports could go, but certainly I’m expecting it to be weaker or lower as well,” he said.
He believes now is a good time to consider selling some canola with cash bids for January delivery eclipsing $20 per bushel as of Dec. 9 in some locations.
Cash prices had been as low as $18. But the recent run-up in canola futures combined with good basis levels has created a nice sales opportunity for farmers as 2022 draws to a close.
“This market going into spring could be totally different,” said Anderson.
“We could certainly be back down to a $17 market.”
He agrees with Ball that the looming competition out of Australia is the main reason for the bearish outlook for the second half of the 2022-23 crop year.
Australia has been on a roll lately, shipping out 5.3 million tonnes of canola last year and 3.75 million tonnes the year before that.
Persistent La Nina weather conditions have greatly benefited crop production over the past three years.
Prior to the three-year run of bumper crops, the country’s five-year average was 2.15 million tonnes of annual canola exports, so six million tonnes would be stratospheric.
Ball believes Australia could take two to three million tonnes of business away from Canada in markets in Asia and Europe.
That is why the commercial traders he has spoken to are forecasting 1.5 to two million tonnes of Canadian carryout, three to four times higher than Agriculture Canada’s estimate of 500,000 tonnes.
On the bright side, it should be noted that the European Union has been buying a lot more canola than was originally anticipated.
DTN reports that the EU has imported 3.1 million tonnes through week 23 of the EU crop year, 41 percent more than the same time last year. That is surprising given that the EU had been forecasting a 19.6 percent decline in 2022-23.
Ukraine has supplied 2.12 million tonnes of that volume. The USDA is forecasting total Ukrainian exports of 2.8 million tonnes this year, which seems to indicate that the door will soon open for EU imports from Canada and Australia.
Canada’s canola export program got off to a decent start this year, with 2.88 million tonnes shipped through week 18, according to the Canadian Grain Commission.
That is on pace for 8.3 million tonnes of exports, which is well below Agriculture Canada’s forecast of 9.3 million tonnes.
But Agriculture Canada’s forecast was based on Statistics Canada’s production estimate of 19.1 million tonnes, which has since been slashed to 18.2 million tonnes.
Ball said grain companies operating in Canada have a vested interest in keeping canola at home because they are making a fortune crushing the crop.
“They would rather crush that tonne of canola, rather than export it,” he said.
He is forecasting 10.2 to 10.3 million tonnes of crush, slightly higher than Agriculture Canada’s 10 million tonnes.
Canada’s canola crush capacity is expected to grow by 5.7 million tonnes over the next few years, a 50 percent increase over today’s capacity.