2015-16 was a record year for Canadian canola demand. Export and domestic consumption surpassed the 19 million tonne mark, according to crop year-end numbers from the Canadian Grain Commission — a 16.6 percent jump from 2014-15.
“The fact that’s versus 16.3 million tonnes last year. That’s almost mind-boggling,” says Brian Voth of Prairie Farm Consulting. “It adds a lot of evidence to what we were saying, that summer carry-out is going to be tighter than anybody realizes, and it probably puts a fair bit of pressure onto the carry-out for this coming year.”
Agriculture and Agri-Food Canada’s latest forecast for 2016-17 sees canola supplies at the end of the crop year dipping below the one million tonne mark to 700,000 tonnes.
“The last time we had carry-out that tight was in the 2012 crop year, after the 2012 drought year. So we’re getting down to pretty tight levels on canola and it’s a little bit odd to me that nobody’s talking about this,” says Voth.
Some of the factors that have driven this record run for canola demand are still in place for 2016-17 — the Canadian dollar remains relatively weak, and canola is still competitively priced versus other oilseeds — but looming changes to import policy in Canada’s largest canola seed export market are threatening to spoil the party.
As of September 1, China says it will implement tighter dockage standards for canola imports that were originally supposed to take effect on April 1. Meeting the new 1 percent dockage requirement, which the Chinese say they’re implementing to address concerns about blackleg disease, could be costly for Canadian exporters. Canadian government representatives were in Beijing last week, but as Rod Nickel of Reuters reported, they were unable to reach a resolution.
“The big question — is this just a ploy from China to keep prices down?” notes Voth. “The last time we had a carryout like this, futures prices were probably about $200/tonne higher.”
Listen to the audio above for more with Voth on what’s happening in the canola market heading into the 2016 harvest.