Canada Lifts Canola Price Hopes, Despite Harvest Upgrade to Record High

(Agrimoney) –  Canada’s farm ministry nudged higher its hopes for domestic canola prices, raising the prospect of a five-year, despite a boost to supply hopes, in a report which also flagged pressure on pulses values.

AAFC, the Canadian farm ministry, upgraded by Can$10 a tonne, to Can$510-550 a tonne, its forecast for average 2017-18 canola prices as measured in Vancouver.

The revision took the midpoint of the range above the Can$529 a tonne, raising the chances of values indeed recording their best year since the Can$650 a tonne achieved in 2012-13.

The upgrade came despite the ministry hiking by 1.6m tonnes, to a record 21.3m tonnes, its estimate for the Canadian canola harvest this year, factoring in results of the Statistics Canada survey released two weeks ago.

“Both seeded area and harvested area set new records,” AAFC.

‘Strong exports’

However, while extra supplies might be expected to weaken price hopes, the ministry flagged a higher quality crop, with a Canadian Grain Commission survey showing oil content “averaging 45.0%, which is higher than 2016-17”, the ministry said.

Furthermore, AAFC highlighted strong export orders, saying that “world demand for Canadian canola remains strong, despite competition from burdensome world soybean, and soyoil, supplies, increased palm oil production and India’s tariff on vegetable oil imports”.

India is the top importer of vegetable oils, a market in which rapeseed/canola oil competes with the likes of soyoil and palm oil.

The ministry lifted by 500,000 tonnes to 11.5m tonnes – a record high, and a gain of 4.4% year on year – its forecast for Canadian canola exports in 2017-18, and signalled that further upgrades may be in the offing.

“Looking forward, further revisions to the export estimates for canola are expected to be upwards, based on increased domestic supplies and the current export pace.”

Canadian Grain Commission data show Canada’s canola exports running 12% ahead of the year-ago pace.

‘Stronger demand’

In wheat, the ministry trimmed its forecast for average 2017-18 durum prices, as measured by Saskatchewan farmgate values, by Can$10 to Can$250-280 a tonne, as it factored in a harvest upgrade of nearly 700,000 tonnes, to 4.96m tonnes, suggested by the StatsCan data.

AAFC also upgraded, by 200,000 tonnes to a three-year high of 4.80m tonnes, its forecast for Canadian durum exports this season, citing the “high quality” of the crop “and stronger demand from the US”, where output tumbled by 47% this year to 1.49m tonnes, thanks to a drop in sowings, and in yields thanks to drought damage.

For other wheat – which in Canada means mainly spring wheat – the price outlook for this season was trimmed by Can$10 to Can$230-260 a tonne, with the depressant of extra output, upgraded by 1.2m tonnes to 25.0m tonnes, also offset in part by the prospect of improved export demand.

Noting that the average grade quality of this year’s Canadian western red spring wheat crop “was much better than for 2016-17”, the AAFC said that exports are forecast to increase by 10%, because of increased supply of high quality hard red spring wheat, and strong demand for that class of wheat in world markets”.

Such demand was seen “especially from the US”, whose own spring wheat crop was, like that of durum, hit by a lack of rainfall.

‘Abundant supply’

The ministry made steeper downgrades to its forecasts for pulses prices, reflecting the extra global supplies, and imposition by India of a 50% import tariff on yellow peas, as previously reported by Agrimoney.

Indeed, cutting by Can$30 a tonne to Can$230-260 a tonne its forecast for farmgate dry pea prices, it foresaw prices being undermined by “abundant supply and expectations for record [Canadian] carryout stocks in 2017-18”.

The forecast for year-end inventories was lifted by 300,000 tonnes to 1.2m tonnes.

During November, “the on-farm price of yellow peas and green peas in Saskatchewan fell by $50 a tonne and $20 a tonne respectively… largely due” to India’s import tariff, the ministry added.

‘Weaker world demand’

For lentils, the forecast for average farmgate prices was downgraded by Can$35 a tonne to Can$500-530 a tonne, with the ministry also citing a rise in carryout stocks as exports wane.

“The overall average price of forecast to below the levels achieved in 2016-17,” of Can$575 a tonne, “due to weaker world demand, largely domestic carryout stocks and despite a higher proportion” of Canada’s lentil harvest this year making the top quality grade.