Canola movement into Europe won't solve supply/demand dynamic of the 2019 crop

What happens when there’s plenty of canola globally and a general bearish tone to the markets? A stubborn sideways market that simply bounces between a narrow price range, with no real reason to break to the upside.

The rumour mill does help with some blips, but overall this market is just flat, says Wendy White, grain marketing manager for Viterra, and with the full harvest looming, that added supply will likely just push the market below the $450 mark, yet again.

Canadian producers have been reminded that there are other markets than China for Canadian canola, but the 4 million metric tonnes that could be headed there, but isn’t, is hurting price prospects for this crop.  Will this sideways market cause a pullback in 2020 acreage? White says that we are looking at about 3.7 mmt of canola carryover, but that alone isn’t enough to push farmers to other crops, such as wheat or barley, if cereal prices don’t also perk up.

The closed Chinese market has increased awareness and interest in the European biodiesel/industrial canola market — but it’s one that requires a sustainability agreement, and doesn’t carry a premium. The sustainably-sourced program isn’t new, but Europe’s poor weather and insect pressure this year has significantly knocked back production there, allowing for expected record flows into the EU from Canada and Ukraine. Farmers interested do have to jump through a few hoops to qualify, including a declaration regarding pesticide use, storage, and land clearing, for example, and the potential of on-farm assessments, too.

Record exports sound promising, but White says that the total added into the EU still only represents about 25 per cent of what would be going into China. This one program is not going to solve the supply/demand picture for this crop, she says.

Hear Wendy White in conversation with Shaun Haney regarding the canola/Western Canada grain market complex, here: 

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