Glacier FarmMedia COVID-19 & the Farm

ICE weekly outlook: Expensive canola required

ICE november canola
ICE November 2021 canola (candlesticks) with 20-, 50- and 100-day moving averages (yellow, green and black lines). (Barchart)

MarketsFarm — Canada’s coming canola harvest, if lower than projected, would add tremendous pressure to prices as supplies could become much tighter than they have, according to trader Ken Ball with PI Financial in Winnipeg.

Ball believes the 2021-22 canola harvest could be as low as 16 million to 17 million tonnes, well below the 20 million tonnes Agriculture and Agri-Food Canada projected — the reason being the drought that has gripped much of the Prairies.

Over the last five years, Canada has produced an average 20.02 million tonnes of canola, according to Statistics Canada.

“I’d be shocked if we made 18 million tonnes right now. To make even that much we’re going to have get some rain,” Ball said, indicating precipitation must come within the next seven to 10 days.

As the 2020-21 marketing year is soon coming to an end, ending stocks are expected to be around 700,000 tonnes. Production for 2021-22 was originally thought to increase, with AAFC estimating the carryout next year at about 750,000 tonnes.

“We have to ration two million to three million tonnes or more. We had 21.4 million tonnes usage last year, so the canola market has a job ahead of it right now,” Ball added.

Canola was attractively priced when compared to other edible oils, such as Chicago soybeans, he said.

“To an end-user buyer, canola is still attractively priced relative to the other markets. At some point in time, it’s going to have to become expensive enough to deter buyers from pursuing it.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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