Statistics Canada estimated on March 31 that Canadian canola ending stocks were 5.95 million metric tons (MMT), which was way below private estimates of 6.9 MMT. Where did a million tons of canola go? Some market analysts speculate that perhaps the recent canola crop in Canada was underestimated. The fact that canola prices did not react meaningfully to the report did not lend confidence to the ending stocks figure. There is talk that the canola crop last year was closer to 19 MMT, rather than the current estimate of 18.1 MMT.
But if the number announced on March 31 is correct, canola ending stocks by the end of this marketing year will get extremely tight since over the last ten years 6 million tons of canola is typically consumed in the April through July timeframe. Exports will have to drop off significantly in response to the lower available supplies. Current ending stocks estimates by both Agriculture and Agri-Food Canada (AAFC) and the USDA will have to be revised lower if ending stocks are indeed 5.95 MMT as of March 31. Both agencies project ending canola stocks in Canada at 1 MMT. For the U.S., the USDA projects ending stocks of 200,000 metric tons (MT).
The canola industry is very concerned about a situation occurring with Canada and China. Canada expelled a Chinese diplomat recently due to interference with a Canadian politician and China then expelled a Canadian diplomat in retaliation. The concern of the canola industry is that China, being the largest importer of Canadian canola, could retaliate further as it did during the Huawei situation several years ago. China has not purchased canola from Canada for several months and this situation could negatively affect new-crop canola sales. The worry is that China will now use any excuse to cancel cargoes. This situation bears watching.
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The May USDA Fats and Oils Report shows that canola seeds crushed for crude oil were 191,291 tons in March, compared with 177,907 tons in February and 163,923 tons in March of last year. Canola crude oil produced was 155 million pounds, up 9 percent from February 2023 and up 24 percent from March 2022.
July ICE canola futures finished the session on May 10 at $734 per MT, down $3.40 on the day. November canola closed at $711 per MT, down $2.20. With North American canola priced $57 per MT above European rapeseed, there is concern that ICE canola is overvalued.
Local cash prices as of May 10 at nearby crush plants ranged from $25.79 to $26.16 for May through June deliveries, up approximately $1 per hundredweight in the last two weeks. New crop canola prices ranged from $23.47 to $24.18, also up approximately $1 per hundredweight in the last two weeks.
As of May 7, canola planting progress in North Dakota was at 3 percent, near 2 percent last year, but behind the 5-year average of 9 percent. For Montana, the second largest canola-producing state, only 2 percent of the canola has been planted, down sharply from last year’s 28 percent and the 5-year average of 25 percent. Flea beetle activity has been observed in the northern area of North Dakota.