Canada: Analysts predict larger canola carryout

Analysts think Canada’s 2023-24 canola carryout will be way bigger than the government is forecasting.

Exports have been sluggish this year, trailing last year’s pace by 18 percent.

Marlene Boersch, managing partner of Mercantile Consulting Venture, has dropped her export number to 7.5 million tonnes, well below last year’s 7.95 million.

She has a bigger production number than Agriculture Canada at 17.79 million tonnes versus 17.37 tonnes.

Statistics Canada’s Production of Principal Field Crops report will shed some light on that debate when it is released on Dec. 4.

Boersch’s carry-in number is also bigger than Agriculture Canada’s at 2.03 million tonnes versus 1.51 million tonnes, as detailed in the recent weekly market outlook article she wrote for SaskCanola.

The result is that she thinks carryout will be 2.19 million tonnes or more than double Agriculture Canada’s forecast of one million tonnes.

MarketsFarm analyst Bruce Burnett is siding with Boersch.

“There’s no question the exports have been slow,” he said.

He believes the 2023-24 carryout will end up around 1.85 million tonnes, assuming there is no dramatic uptick in sales to China.

Burnett said Agriculture Canada’s number was always a bit of a fantasy because it would never drop that low. But his higher carryout number is still not burdensome.

Canada’s lower exports will be partially offset by strong demand from the domestic crush sector, which processed a record 974,376 tonnes of the crop in October.

Boersch said they are on pace to crush 10.9 million tonnes of the crop this year.

But she thinks it is premature to increase projections, so she is leaving her number at 10 million tonnes for the time being.

Burnett thinks it will be at least 10.5 million tonnes and possibly even 11 million tonnes, which is why his carryout number is smaller than Boersch’s.

If the Canadian Canola Board Crush Margin stays in that $170 to $200 per tonne range, there will be strong incentive to maximize capacity, he said.

Canola futures prices have been declining of late, which might be because of the market realizing that ending stocks are climbing but also could be due to slumping soy and palm oil prices, said Burnett.

He hasn’t completely given up on a late-season rebound in exports. A lot depends on what happens with competing products like soybean oil.

That will largely be determined by what occurs in South America over the next few months.

Argentina will be an important market to watch following the election of new president, Javier Milei.

“Farmers there are not selling ahead of a hoped-for currency devaluation and a promised reduction or elimination of export taxes,” said Boersch in her article.

Three-quarters of Argentina’s crush plants are sitting idle because of this year’s crop shortfall and farmers retaining product, she said.

Burnett thinks that could open some doors for canola in tight global vegetable oil markets.

“There’s probably some opportunities for countries to use canola in their crushing streams in order to boost their oil output,” he said.

But the biggest market factor will likely be Brazil’s soybean crop, where limited rainfall recently returned to the central part of the country.

But more is needed, according to an article published on the Soybean & Corn Advisor website.

“After a problematic start to the growing season, the Brazilian soybean crop needs additional rainfall in central

Brazil and dryer weather in southern Brazil,” said author Michael Cordonnier.

Tags: Canada, Production, projections, forecast, carryout, China, export, canola