The final numbers are still being tabulated, but when all is said and done the 2014/15 Canadian canola crop ended up considerably smaller than the record of the previous year. However, tighter supplies won’t necessarily translate into higher prices, as canola finds itself drowning in a global ocean of edible oils.
In a late-August report, Statistics Canada pegged the country’s 2014/15 canola production at 13.9 million tonnes, about four million tonnes behind the record of the 2013-14 crop year. In a separate report, StatsCan pegged ending stocks for 2013/14 at 2.3 million tonnes. While that canola carryover was fourtimes larger than the previous year’s, average market expectations had been for even bigger stocks.
Demand remains strong for canola, as both Canadian and northern-tier U.S. crushers increased their capacity in recent years and international vegetable oil requirements continued to grow as well.
Canada exported more than 8.2 million tonnes of canola in 2013/14, according to the Canadian Grain Commission, and crushed 6.9 million tonnes domestically, according to the Canadian Oilseed Processors Association. Usage was up on both fronts, and early data for the 2014/15 crop year already suggests high demand once again.
The smaller crop and solid demand implies that the canola market will need to ration some of that demand, or risk running out of supplies. However, canola is not the only player, and any strength in canola may only be found in relation to other oilseeds.
The U.S. soybean crop is the most immediate outside influence on the canola market. In September, the U.S. Department of Agriculture forecast the 2014/15 U.S. soybean production at a record 3.91 billion bushels (106.4 million tonnes). The big U.S. crop will be a damper on canola prices heading through the marketing year.
In addition to the big soybean crop, an even bigger anchor weighing on the world vegetable oil market is palm oil. In early September, futures prices for this tropical oil were trading at their lowest levels since 2009, and analysts warn that values could eventually go lower. FF
— Phil Franz-Warkentin writes for Commodity News Service Canada.