While corn, soybean and wheat markets are under pressure from heavy supplies, the outlook for the canola market is relatively tight.
Canadian canola production for 2014 was pegged at 14.1 million metric tonnes in the Statistics Canada crop production report published Friday morning — a slight increase from the agency’s August estimates, but below the average pre-report trade guess.
Wayne Palmer, senior market analyst with Agri-Trend Marketing, says he has no doubt that the canola production number, which was based on a farmer survey in early September, will be revised upward.
“It will definitely be higher. All of our coaches across Canada are saying yields were underestimated,” he says in the interview posted above. “That number will probably be inflated by another half a million tonnes.”
While that still leaves canola in a tight situation, he says canola will not rally as long as soybean prices continue sliding.
“You can only put canola up so far,” he says. “We’re overpriced because fundamentally there are no end-users buying at these kind of prices. They’ll look at other products before they’ll buy canola.”
Buyers are waiting for harvest pressure to create new contract lows in the oilseed market over the next few weeks, suggests Palmer.
“Unless there’s something unforeseen in the bean market, beans will go below $9 a bushel. If they go under $9 a bushel, unfortunately canola will make a new contract low, and producers needs space,” he says. “Unfortunately they need space and they probably need some money.”
From there, Palmer says he’s expecting a moderate rally after harvest is complete, and then “possibly a good rally come spring of 2015.”
“These prices on the board right now will be low compared to what you’re going to get in early 2015. You just have to be able to store it,” he says.
Speaking of soybeans, StatsCan is projecting record Canadian production of 6 million tonnes, mainly due to increases in acreage in Ontario and Quebec. Production in Manitoba is expected to remain steady with last year, as lower yields offset an increase in acres.
As for wheat, StatsCan projected Canadian wheat production at 27.5 million tonnes — a small cut from the August projections, and also lower than the trade was generally expecting.
The report also outlined year-over-year increases for several specialty crops, including flax, dry beans, mustard seed and sunflowers.
Can’t see the audio above? Click here.