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China eats into Canada’s record canola supply

(Resource News International) — The surfacing of much-needed export business and ideas this demand will remain constant through the remainder of the 2008-09 crop year will be key to determining how much Canadian canola will be left over heading into the 2009-10 season, according to market participants.

“Canola supplies in Canada at the end of the 2008-09 season will be record-sized, but just how large the record will be is still very much up in the air,” said Glenn Lennox, an oilseed analyst with the market analysis branch of Agriculture and Agri-Food Canada.

Lennox currently forecasts 2008-09 canola ending stocks at a record three million tonnes. The previous record was established during the 1999-2000 crop year, when canola carryover stocks hit 2.157 million tonnes. Canola ending stocks in 2007-08 were 1.541 million tonnes.

“There is a good chance my canola ending stocks projection for 2008-09 will be reduced from three million, but it will be dependent on just how much canola will be exported,” he said.

Lennox had been working with a 6.4 million-tonne canola export total for 2008-09, but acknowledged that recent Chinese demand and potential other fresh exports will result in that number being adjusted upward.

“Stronger than expected exports to date and the new sales to China may result in that figure being bumped upwards to the seven million-tonne level,” Lennox said.

Ken Ball, a broker with Union Securities Ltd. in Winnipeg, felt that canola ending stocks for 2008-09 will likely be in the 2.2 million- to possibly 2.3 million-tonne range, given the recent jump in export demand.

Lower further

Mike Jubinville, an analyst with the farmer advisory service ProFarmer Canada, had also been working with a 2008-09 canola carryout estimate of 2.2 million to 2.3 million tonnes, but with the recent Chinese demand for Canadian canola he was willing to lower that projection further.

“I’m willing to lower the ending stocks estimate for canola to two million tonnes, given the Chinese developments,” Jubinville said.

An export source confirmed Tuesday that China’s demand for Canadian canola has increased substantially, with the country agreeing to purchase a minimum of five cargoes — or roughly 250,000 tonnes a month — of Canadian canola through to the end of May, on top of the 250,000 purchased last week. Several cargoes of Canadian canola have also been purchased by China this week, the source added.

Jubinville said this demand will help to chew through the large canola supply base.

“There were also ideas that China would have purchased additional quantities of Canadian canola per month, but it was Canada’s transportation logistics that prevented the monthly total from climbing,” he said. “Essentially, Canada’s transportation was close to capacity and could only handle another 250,000 to 300,000 tonnes per month.”

Grain handling statistics from the Canadian Grain Commission for the week ended Feb. 1 showed Canada’s canola exports in 2008-09 were way ahead of the year ago pace. As of Feb. 1, 3.517 million tonnes of Canadian canola had been exported, which compared with 2.850 million at the same time the year previous.

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