Ample oil supplies lead industry analysts to forecast slipping prices through June.
World production of seven oilseeds will rise more sharply than expected in 2014/15, assuming normal weather in the Southern Hemisphere, reports Oil World. During the holidays, canola enjoyed spillover support from other players in the vegetable oil market — namely soy oil and Malaysian palm oil.
However RBC Dominion Securities’ Keith Ferley explains that the main influence came from the loonie. “I think this is a six-year low in the Canadian dollar,” he says.
With the onset of the next tax season, canola could feel pressure from farmers who want to sell and commercial entities that wish to buy, Ferley adds.
However, Mike Jubinville of ProFarmer Canada says the lack of significant farmer selling in Western Canada helped limit losses in canola. “With cash flow needs met, producers might be content to sit and wait for better prices,” Jubinville says. “Demand for canola is strong, and that will keep buyers active as prices decline. By early 2015, we might be surprised how much canola has been used.”
He adds that the weak Canadian dollar might mitigate the negative effect of a now weakening turn in world oilseed and vegetable oil markets to some degree, but a bearish turn in canola remains evident in the near-term as canola prices are forecast to decline by eight per cent, according to Agriculture and Agri-Food Canada.
“ProFarmer Canada believes the vegetable oil story has potential to provide lift for oilseed prices down the road, probably igniting when traders believe the price of energy has bottomed,” Jubinville says. “We also believe another risk of winter El Nino chatter, compromising palm production, is likely to emerge. And how many South American growing seasons go without at least one hiccup?”
Canada’s canola production for 2014/15 is the second highest on record, according to AAFC’s Dec. 19 Canada: Outlook for Principle Field Crops report. Even though production was down 13 per cent from 2013/14, output exceeded the Canola Council of Canada’s target of 15 million tonnes for the second year. The area seeded increased by two per cent from 2013/14, while the area harvested increased by one per cent.
For 2014/15, AAFC expects canola exports to increase on steady world demand and increased pre-harvest shipping compared to a year ago. Shipments are forecast to be constrained by burdensome world supplies of oilseeds, vegetable oils and protein meals. Domestic crush is forecast to increase by three per cent. Carry-out stocks are projected to fall by 39 per cent to 1.45 million tonnes, for a stocks-to-use ratio of nine per cent.
If AAFC’s prediction of an eight-per cent price decline holds true, what might that mean for acres seeded come spring?
Julie Deering
