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MAY 26, 2011 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
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CANOLA | WORLD PRODUCTION
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Global canola problems in dispute
Buyers pay premium for HRSW
Big losses forecast | Some analysts question if China’s problems are that serious BY SEAN PRATT SASKATOON NEWSROOM
Analysts are calling into question the magnitude of losses being reported for the world’s deteriorating rapeseed crop. Crop fortunes have taken a turn for the worse in Europe and China, the world’s two biggest winter seeded rapeseed production regions. Oil World recently sliced its European Union rapeseed production estimate to a three-year low of 19.5 million tonnes, down from its April estimate of 20.1 million tonnes. “The deterioration of rapeseed production prospects is about to reach alarming proportions,” said the market analysis publication in a May 13 update. The situation is equally dire in China, according to a May 10 Reuters News Agency story in which analysts forecast 10 million tonnes of rapeseed production, down 24 percent from last year’s 13.15 million tonne harvest. No explanation was provided for the decline but drought has been a problem in some areas of China this year. One month ago, a senior official with China’s state grain trader Cofco Ltd. was forecasting a 10 to 15 percent crop reduction. Drew Lerner, president of World Weather Inc., has a hard time believing the Chinese production outlook because the crop has received timely rains during the bulk of the growing season. “I don’t think the China crop got hurt much. If it has got any losses I don’t think it should be very substantial,” he said. There was some dryness in the northern portion of the production region earlier this year but it was never as serious in rapeseed country. Darren Frank, market analyst with FarmLink Marketing Solutions, isn’t buying the 10 million tonne estimate either. “The guys I talk to don’t think it’s that small. But we could be looking at a crop down close to around 12 million tonnes,” he said. China typically doesn’t carry over much rapeseed and the government
BY ED WHITE WINNIPEG BUREAU
China had been forecasting a 10 to 15 percent drop in rapeseed production, but timely rain may have come to the rescue. | FILE PHOTO has been depleting its reserves of rapeseed oil. If the new crop is down 1.15 million tones, China could be in the market for Canadian canola seed and oil. Lerner said Oil World’s forecast of a 1.15 million tonne drop in European Union rapeseed production is more believable because there has been plenty of moisture stress in France, Germany and the United Kingdom. “I do think that there’s some justification for losses in oilseed production in Europe. I don’t have a problem with that,” he said. The crop outlook is still uncertain in Canada, the world’s largest canola exporter, where seeding is significantly delayed in southeastern Saskatchewan and southwestern Manitoba. “We’re probably going to see some abandoned acres there because it’s just too blasted wet,” said Lerner, adding that the affected area is not as large as it was last year.
Frank has cut his canola seeding estimate to 18.5 million acres, down from 19.2 million earlier this spring. He forecasts 12.85 million tonnes of production, which is smaller than Agriculture Canada’s 13.3 million tonne estimate. Other Canadian grain industry analysts predict as much as two million acres of canola will go unseeded. Lerner said seeding is progressing in drier areas of the Prairies, although he is concerned about increasing dryness in northwestern Saskatchewan and northeastern Alberta. Ukraine and Australia are two rapeseed-canola growing regions that could produce good crops but they are small players and any increased production would have minimal impact on global supplies. Ukrainian growers have been blessed with timely precipitation throughout the growing season, while ideal planting conditions in eastern Australia are expected to off-
set 17 months of consecutive drought in Western Australia. The Australian Oilseed Federation forecasts a record 2.4 million tonnes of canola in 2011, up from 2.1 million tonnes last year. Western Australia received rain last week but Lerner said most of the state didn’t get more than 10 millimetres of moisture. He thinks there is potential the situation will improve in the next few weeks. Frank said the global outlook adds up to tightening of rapeseed-canola supplies. “Unless we have some problems with the soybean crop or some palm oil production problems, you’re probably going to see canola oil stay at a fairly hefty premium to the other vegetable oils,” he said. FOR NEWS ON EUROPE’S DROUGHT AND BLACK SEA REGION CROPS, SEE PAGE 20
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Buyers are chasing hard red spring wheat. “They’ve really come with a premium,” said North Dakota Wheat Commission market analyst Erica Olson about recent cash market bids for hard red spring wheat. “Our basis level is really strong right now.” Buyers are paying North Dakota farmers from 30 cents per bushel to $1.50 per bu. over futures prices to secure physical grain, she said. Usually cash market prices are below futures prices. According to Reuters News Agency, commercial users of hard red spring wheat have been paying as much as $8 per bu. over Minneapolis Grain Exchange spring wheat futures for rail cars of quality spring wheat, to as high as $14.30 per bu., a price not seen since the 2008 rally. Top quality spring wheat can be blended with other types of wheat to bring up the overall quality of flour. Continuing wet weather in the Dakotas has caused the wheat crop to be badly delayed, and wet soils and cold temperatures have retarded the Canadian crop’s seeding progress. Since those are the two main growing regions for hard red spring wheat in North America, and North America is one of the biggest exporters of spring wheat in the world, the markets are paying attention. “Weather concerns continue to highlight supply side risks at a time when inventories are low and market balances tight,” said Barclays Capital in its weekly commodities newsletter released May 20. The Canadian Wheat Board’s Producer Payment Options Updater newsletter of May 18 agreed. “The world is very much in a prolonged weather market,” it said. “The continuing struggle to get the crop planted is casting a shadow on production potential.” access=subscriber section=markets,crops,none
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