Huge Canada canola crop boon to crushers, exporters
Canada's expected record-large canola crop looks to re-stock the country's seed exporters and crushers after a disappointing previous harvest, and top up already growing global oilseed supplies, industry sources said.
Canada is the world's biggest producer of canola, which is mainly used to make vegetable oil for foods like potato chips and salad dressings. Statistics Canada pegs this year's harvest at 14.7 million tonnes, but many traders and analysts expect output to be even higher.
A bountiful harvest is just what Canadian crushers and seed exporters need after last year's 13.9-million tonne harvest left skimpy supplies by summer that inflated prices.
"We should have a fairly consistent or fluid pipeline for this entire year," said Dean McQueen, vice-president of merchandising and transportation at Viterra, one of Western Canada's two biggest crop handlers and owner of a canola plant in Manitoba.
This year's bumper crop comes amid concerns that hot, dry weather will trim production of U.S. soybeans, a rival to canola in the global vegetable oil market.
Even so, the U.S. Department of Agriculture forecasts global soybean production of nearly 282 million tonnes in 2013/14, an increase of 5 percent from the previous year. The world canola/rapeseed harvest is forecast around 66 million tonnes, up nearly 7 percent, while global palm oil output of 58 million tonnes also looks to rise 5 percent, according to USDA.
There are few worries, however, that canola demand can keep pace with supply.
"The cupboard was pretty bare at the end of (2012/13), so I don't see us having a huge excess of production lying around," said Kevin Price, senior trader for the Canadian office of Singapore-based Agrocorp International.
"Canola can differentiate itself in the market quite well."
The industry markets canola oil as one of the healthiest vegetable oils, due to its low level of saturated fat.
Agriculture and Agri-Food Canada estimates that Canadian canola exports will climb by 450,000 tonnes or 6 percent in 2013/14 due to larger supplies and strong global consumption.
Canada exported 7.2 million tonnes of canola seed in 2012/13, down 16 percent from the previous year. China was the biggest export destination, followed closely by Japan.
Japanese purchases should remain steady, Price said, while Chinese buys are harder to predict.
"If the price is right, (China) will continue to buy," he said.
Canada accounts for about 59 percent of global exports of canola, also known as rapeseed, followed by Australia and Ukraine.