Canada’s drought forces canola importers to turn elsewhere

'Importers...are going to be left out in the cold'

File photo of a canola crop south of Ethelton, Sask. in 2019. (Dave Bedard photo)

Winnipeg | Reuters — Canada’s smallest canola harvest in 13 years, resulting from severe drought, is forcing importers like Japan and Mexico to pay more or scour other countries for the yellow-flowering oilseed.

With the scant available Canadian canola fetching high prices, customers of the world’s biggest canola exporter are leaning more heavily on smaller-producing countries or alternative vegetable oils such as palm and soybean oil, adding to global food inflation.

Labour shortages and pests are also eating into those oil supplies.

Both export markets and Canadian crushers, who process canola into oil for food or fuel, and meal for animal feed, are coming up far short of normal supplies.

Canada exported 388,000 tonnes of canola from Aug. 1 through the first seven weeks of the new crop year, down 71 per cent year over year, according to the Canadian Grain Commission.

With little to sell, exporters are mainly executing sales that they struck before drought damage drove up prices, with Canadian crushers buying nearly all available supplies, an exporter said.

“The entire market is still in a bit of shock,” he said.

In virtually all of the countries to which Canada normally exports canola, crushing the seed loses money, due to canola’s high price, he said.

Most-active ICE canola futures trade around $900 per tonne, up more than 70 per cent year over year.

Through the crop year ending July 31, 2022, Canadian canola exports are likely to fall 38 per cent to 6.5 million tonnes, while crushing volumes tumble to 7.5 million tonnes from last year’s record 10.4 million, according to Agriculture and Agri-Food Canada.

Canadian crushers, who include Bunge and Archer Daniels Midland, processed 661,968 tonnes of canola in August, the smallest monthly volume in 2-1/2 years.

Australia and Ukraine, which have bigger harvests this year, stand to benefit from Canada’s crop disaster, picking up new sales, said Stephen Nicholson, senior analyst of grains and oilseeds for investment bank Rabobank.

Those countries typically export far less than Canada’s volumes, however, Nicholson said.

“It’s not like there’s this big reservoir of canola out there looking for a home,” he said. “The importers are the ones that are going to be left out in the cold.”

Canada’s biggest export markets are usually China, Japan, Mexico and the United Arab Emirates.

China is buying only limited volumes of Canadian canola due to low supplies and current high prices, opting instead for canola oil from Russia and Ukraine, according to a China-based trader.

China has for two years barred canola imports from Canadian exporters Richardson International and Viterra, due to strained relations with Canada. If canola shipments from Canada drop further due to drought, Chinese buyers can turn to alternative animal feeds from soymeal and sunflower meal, and other edible oils as alternatives, industry sources said.

Bids for Ukrainian rapeseed, a cousin of canola, have risen over the past week, as the number of offers from suppliers shrinks due to declining stocks, APK-Inform consultancy said.

— Reporting for Reuters by Rod Nickel in Winnipeg; additional reporting by Hallie Gu in Beijing and Pavel Polityuk in Kiev.

ice november canola
By MarketsFarm WINNIPEG, Dec. 11 (MarketsFarm) - The Canadian dollar was lower on Friday, stepping away from highs unseen in two and a half year as the United States dollar regained some lost ground and as North American markets turned cautious. The dollar finished at US$0.7831 or US$1.2769, compared to Thursday’s close of US$0.7853 or US$1=C$1.2734. The greenback was up 0.159 on the U.S. Dollar Index at 90.910 points. The markets were concerned about the United Kingdom and the European Union being unable to reach an agreement on a trade deal, plus the inability of the U.S. Congress to agree on a fiscal stimulus package. Benchmark crude oil prices were lower on Friday, as pandemic lockdown restrictions in New York take effect on Dec. 14. That effectively countered market hopes towards coronavirus vaccines. Brent crude oil was down 26 cents at US$49.99 per barrel. West Texas Intermediate (WTI) crude oil dipped 19 cents at US$46.59/barrel. Western Canadian Select (WCS) crude oil fell 70 cents at US$33.74/barrel. The TSX Composite Index was down 44.42 points on Friday to finish at 17,548.92. Gold was up US$3.22 at US$1,839.80 per ounce. Canada's agricultural sector fared as follows: Buhler Industries up $ 0.01 at $ 2.76 Linamar Corp. dn $ 1.17 at $ 67.13 Maple Leaf Foods up $ 0.27 at $ 28.22 Nutrien Ltd. up $ 0.07 at $ 62.70 Ritchie Bros Auctioneers Inc. dn $ 1.90 at $ 90.29 Rocky Mountain Dealerships Inc. up $ 0.50 at $ 7.40 (All figures are in Canadian dollars.)

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