Canola export outlook changes amid production shortfall

Canadian canola exports during the 2012-13 crop year were expected to come in at a record-high level — but smaller-than-anticipated production is now predicted to dim those prospects.

Agriculture and Agri-Food Canada, in its September supply/demand outlook, had forecast Canada’s 2012-13 canola export program to come in at a record 8.701 million tonnes, with Japan, China, the U.S., Mexico and the European Union being some of the largest customers.

"The ability of Canada to export canola has taken a serious downturn and now appears that only 7.2 million tonnes will be moved offshore," said Fred Oleson, director of AAFC’s market analysis group in Winnipeg.

During the 2011-12 season, Canada exported 7.105 million tonnes of canola.

The decline in the export picture was linked solely to the significant reduction in canola output during 2012-13 which was made by Statistics Canada, he said.

StatsCan, in its production survey released Oct. 4, pegged Canada’s 2012-13 canola crop at 13.359 million tonnes, which compared with the August forecast of 15.409 million. In 2011-12, Canada’s canola production totalled 14.493 million tonnes.

With canola exports now forecast to drop to 7.2 million tonnes, Oleson speculated sales to China, Mexico and other destinations would drop proportionately.

He acknowledged that in AAFC’s September supply/demand tables, it had been forecast China would take roughly 2.5 million tonnes of Canadian canola in 2012-13, Japan would purchase 2.2 million and Mexico 1.5 million. The rest would be split between outlets such as the U.S., the EU and the United Arab Emirates.

However, with the reduced exportable canola supply from Canada, Oleson estimated that China’s purchases would likely drop to the 1.5 million- to two million-tonne range while Mexican demand would fall toward the 1.2 million-tonne range.

Japan, which has been a traditional customer of Canada’s canola, was expected to remain a consistent buyer, taking the full 2.2 million tonnes.

The key to canola export sales in 2012-13 will be which country wants the commodity the most and who is willing to pay the cost to get that product, said Mike Jubinville, an analyst with ProFarmer Canada in Winnipeg.

Pakistan, which bought at least 500,000 tonnes of Canadian canola in 2011-12, is a cost-sensitive customer, he said.

"The fact that canola ending stocks are forecast at only 450,000 tonnes in 2012-13, should result in values of the commodity staying fairly high," he said.

Oleson said that Canadian canola sales to the EU, Pakistan and the UAE will likely decline as a result of the strong price outlook.

— Dwayne Klassen writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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