Even if 2021 canola production is adjusted somewhat higher, canola carryover will be extremely small.
“Producers with any unpriced canola have been pleased and amazed by the continued price increases to record highs,” says Neil Blue, provincial crops market analyst with Alberta Agriculture, Forestry and Rural Economic Development. “Many market analysts prematurely called the high in canola prices during the past winter.”
Strong vegetable oil demand, COVID-related labour problems, speculator commodity buying and the halt to vegetable oil exports from Ukraine have all been price supportive factors. New record canola prices have been set for both futures and cash.
Figure 1. Alberta Canola Price $/T
Source: Alberta Agriculture, Food and Rural Economic Development survey
“Canadian canola supplies were 8.5 million tonnes lower to start the 2021-22 crop year compared to last crop year. There was spectacular usage last crop year followed by the drought-reduced Canadian crop. Domestic canola demand has again been strong following last year’s record Canadian crush. Canola exports have been restricted by the lower available supplies and rising price.”
According to Canadian Grain Commission data, as of May 1, bulk exports of canola from Canada this crop year are 4.3 million tonnes, about half of last year’s pace. However, domestic canola crushing to May 1, at 7.1 million tonnes, is only one million tonnes below the year ago pace. The pace of total canola usage this crop year has averaged about 1.25 million tonnes per month.
Statistics Canada estimates the March 31 Canadian canola stocks at 3.94 million tonnes. The Canadian Grain Commission reports that about 1.2 million tonnes of canola have since been exported or crushed, thus maintaining that monthly pace. That leaves about 3 million tonnes of canola with only 3 months remaining in this crop year and another few weeks to new crop availability.
“The function of price is to meter supply out to demand. The high prices tend to discourage demand to prevent a critical shortage of product,” explains Blue. “Crush margins have been strong and we do not know how far ahead crushers have booked product sales. Even if 2021 canola production is adjusted somewhat higher, canola carryover will be extremely small. Barring a severe price drop in vegetable oil prices due to yet unknown factors, canola prices are likely to remain volatile and high until a renewed supply of canola is assured.”