(Resource News International) — Canada’s canola export pace for the 2008-09 marketing year, which began Aug. 1 and ends July 31, 2009, has been slow to heat up as end-users bide their time waiting for more information on the size and quality of the Canadian crop, market participants said.
“There are going to be some periodic rumours of Canadian canola business being done, with some going to Dubai and possibly bits and pieces to China,” said Greg Kostal, an analyst with Kostal Consulting Inc., in Winnipeg.
In fact, export sources reported that a 50,000-tonne cargo of Canadian canola was sold to China during Thursday’s session, the second for the week. Both sales were for November-December delivery.
The exporters said the sale came amid the Canadian dollar dropping to its lowest level in almost a year and because of the recent declines posted by canola.
“These kinds of small sales are going to make their way on the books,” Kostal said. However, the small sales are a far cry from when China was previously purchasing 200,000 tonnes of Canadian canola per month.
“In order for the export demand for Canadian canola to become a bit more aggressive, there will need to be a month or so of market stability in all commodities in general which has not occurred for quite some time,” Kostal said. “Speculators of all types seem to be generating a very uneven tone to the commodity markets.”
Kostal said end-users were also waiting to find out more about the size of Canada’s canola crop as well as the quality.
“The canola crop in Canada is on its way to being a lot larger than what the industry had first anticipated, and buyers are certainly aware of this and in turn have been holding off making purchases,” he said.
Another possible factor in the slow export sales pace is that Canadian exporters sold five to six cargoes of Canadian canola to China quite a while back for forward delivery.
“There is concern about those sales being defaulted on by China, given the recent push to new lows by Malaysian palm oil,” Kostal said.
He said those sales may have to clear before Canadian exporters make some additional moves.
Mike Jubinville, a Winnipeg analyst with the farmer advisory service ProFarmer Canada felt there was a need for Canada’s canola export program to begin picking up sooner rather than later, given the larger old-crop supply of canola and the potential large new-crop stocks.
Jubinville said Agriculture and Agri-Food Canada’s 2008-09 canola export projection of 5.7 million tonnes was obtainable. During 2007-08 Canadian canola exports totalled 5.585 million tonnes.
However, he said, in order for those export projections to be met, secondary buyers such as Pakistan and China will need to start taking some significant tonnage.
“Canola prices have been declining as efforts are being made to try to find the area in which exports will pick up,” Jubinville said.
A private export source said seasonal logistical transportation factors could eventually become a problem and could curtail any effort to move canola from Canada.