Canola prices look placed for gains despite the prospect of a rise in sowings in Canada, the top exporter, to the second highest area on record, officials said, foreseeing “tight” supplies.
Canadian canola prices, as measured in Vancouver, will average Can$510-550 a tonne in 2016-17, compared with the Can$495-525 a tonne expected for the last crop, Canada’s farm ministry, AAFC, said in its first forecast for next season.
The forecast of a likely increase to what would be the best result since the Can$650 a tonne achieved in 2012-13 factors in a slight recovery in the Canadian dollar, implying that the appreciation will be reflected in world markets.
The estimated rise comes despite expectations of higher Canadian canola sowings this year.
The ministry, citing “attractive returns compared to other crops”, forecast seedings of the rapeseed variant rising by more than 300,000 hectares year on year to 8.44m hectares, the second biggest sowing area on record.
However, allowing for a reversal in yield back to the 2014 level of 1.97 tonnes per hectare, from the strong 2.13 tonnes per hectare achieved last year, AAFC forecast a smaller harvest despite the extra plantings.
Canada will produce 16.5m tonnes of canola this year, a drop of 730,000 tonnes, the ministry said.
Even factoring in a drop in inventories to a four-year low of 1.20m tonnes, output at this level will imply a drop in exports of 500,000 tonnes to 9.0m tonnes.
This decline in supplies would come “in the face of steady-to-strong world demand”, boosted by a dent to rapeseed output in the European Union, the top grower and producer, from an insecticide ban, and a dry autumn which has also dented prospects in Ukraine, a major exporter.
“As the result of a comparatively strong world vegetable oil market and tight stocks-to-use ratio, the price of canola is forecast to rise slightly,” AAFC said.
The comments come at a time of modest firmness in canola futures, which have recovered from a late-November low of Can$457.00 a tonne in late November to stand on Tuesday at Can$482.40 a tonne in Winnipeg, on a spot contract basis.
However, this appreciation largely reflects weakness in the Canadian dollar, which last week touched Can$1.4689 to $1, the weakest since April 2003.
Paris rapeseed futures, denied support from a weakened currency, have fared less well, standing at E361.00 a tonne on Tuesday for the spot February contract, down 3.5% so far in 2016.
With rapeseed and canola largely used for making biodiesel, the market has faced downward pressure from the slump in crude oil prices.
(Source – http://www.agrimoney.com/news/canola-prices-poised-for-gains-despite-rise-in-canadian-sowings–9226.html)