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Canola exports to decline as supplies tighten

Canadian exports of canola are projected to decline for a third consecutive year in 2010-11 and a fourth straight year in 2011-12, according to Agriculture and Agri-Food Canada. However, the lower export numbers are not for lack of demand.

Canada is forecast to export 7.1 million tonnes of canola seed in 2010-11, and seven million in 2011-12. Those numbers compare to 7.908 million in 2008-09, and 7.169 in 2009-10.

Chris Beckman, oilseed analyst with AAFC’s market analysis group in Winnipeg, said the lower export numbers reflect supplies, not a lack of demand.

“World demand is remaining quite strong, but we are growing our domestic crush pace faster than we are growing our production,” he said. “What is happening is we are being forced to ration demand a little bit, and we are seeing that affecting our export pace more than our crush.

“If we had more (canola) we could ship more,” he said.

Canada has already set a new crush record this year, shattering the previous record of 4.79 million tonnes set in the 2009-10 crop year. As of July 6 this year, Canada had crushed 5.56 million tonnes of canola, 1.31 million more than at the same time last year.

“We are looking at rationing demand a bit between exporters and crushers. I think both sectors are taking a bit of a hit,” he said. “We could export more canola if we had it and we could crush more canola if we had it.”

Even though Statistics Canada has said Canada planted a record amount of acres this year, Beckman said production is still very much up in the air, hence the reason for the anticipated tighter stocks.

Canada’s largest export destination for canola in 2010-11 has been pegged as Japan, with the Asian nation importing 2.1 million tonnes, down slightly from 2.141 million last year. For 2011-12 the Japanese are seen importing 2.2 million tonnes from Canada.

The largest change from 2009-10 to 2010-11 is in China, as the Chinese are projected to import 53 per cent less canola from Canada.

“China had big imports of soybeans and they are sitting on quite large stocks of soybean oil,” Beckman said. “Also, they put the blackleg ban on canola, so what they’ve done is instead of importing canola, they have imported canola oil.”

Chinese exports of canola are expected to go from 2.117 million in 2009-10, to just one million in the current 2010-11 crop year.

“Lined up”

While China is expected to see a large decline in canola purchases, a large increase has been seen from Pakistan, which is projected to more than triple its imports of Canadian canola from one year ago, going from 277,500 tonnes in 2009-10, up to 900,000 tonnes in 2010-11.

“Pakistan always wants more, but it’s an issue of whether or not they can afford it,” Beckman said. “Things must have lined up for them this year, and they must have had a surplus of money and were able to buy a bunch of product.”

Canada is projected to export 1.2 million tonnes of canola to Mexico, and 500,000 to the U.S. Both numbers are slightly lower than in 2009-10, which Beckman attributed to Canada rationing supplies.

Beckman also noted that the United Arab Emirates have become a significant buyer, projected to purchase 800,000 tonnes of canola in the current crop year, up from 521,000 in 2009-10.

“They are crushing and shipping more than they have been, and helping to develop some other markets,” he said.

The price of canola has seen a substantial increase over the past year, and Beckman said if that happens again over the next crop year, the seven million-tonne export projection could end up being lower.

“If prices continue to rise we would expect some of the weaker buyers to back out of the market because they can’t afford it,” he said.

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