Canola Supplies Could Run Tight With Crushers Off to Strong Start

Canola supplies could be tight this year, as the market awaits Statistics Canada’s new crop production estimates on Tuesday (Dec. 6.)

The canola number, which is expected to fall somewhere between 18.2 and 19.7 million tonnes, will have to be interpreted with the timing of StatsCan’s survey in mind. The agency surveyed farmers from Oct. 21 to Nov. 13 — just as harvest was resuming in parts of Alberta and Saskatchewan after a month of rain and snow.

“I believe StatsCan is going to be closer to the 18.2 number, but when it’s all said and done, because we got most of that crop off, we could be closer to 19.5,” says Wayne Palmer, senior analyst with Agri-Trend Marketing, in our chat below.

Even if canola production ends up at the higher end of the pre-report range of estimates, supplies could be tight, he says:

“Exports are going to be good. Crush is going to be fantastic. So we need the higher range on that crop production in canola to meet demand, or we’re going to have a shortfall…”

With strong crush margins, processors have been operating in high gear, currently 15 percent ahead of 2015-16 in canola crushed year-to-date.

“They’re going at full bore and look to continue to go that way,” notes Palmer.

The $25-over spread between July and November futures also signals supplies could run short.

“That tells you the commercials think there’s going to be a shortfall somewhere along the line, and unless we can prove the crop is closer to 20 million, we’re going to have a lot of fun on that spread,” he explains, noting line companies will eventually start putting a premium on November futures to lock up early delivery next fall.

Palmer joined us on RealAg Radio this week to discuss what’s going on in the canola market and where it could be headed:


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