Canada is expecting its canola exports to dive 18% in the current 2015-2016 crop year as Canadian sellers suffer competition from abundant supplies of cheap palm and soybean oil, despite a sharp October uprate to September’s dismal harvest projection.
The Canadian government uprated its 2015-2016 canola harvest projection by 7% compared to its September forecast thanks to improved moisture conditions in Saskatchewan and Alberta, with output now expected to hit 14.3mn t. Despite the uprate output will still be down 13% from last year on lower yields and lower harvested area, with yields marked down 9% from last year at 1.8t/ha and 5% below the five year average.
Exports are forecast to slump from 9.15mn t a year ago to just 7.5mn t as Canadian sellers suffer competition from record global soybean harvests and strong palm oil output. Canadian sellers however will receive some protection against US dollar-denominated rivals from the 20% depreciation in the Canadian dollar over the past year, while mounting concerns over Indonesia’s palm oil output amid signs that El Nino related drought is taking hold have lifted palm oil prices relative to competing grades since September. Canada also sees little threat from Australia’s recently expanded canola export industry given Canada’s focus on sales to Japan, China, Mexico and the US relative to Australia’s focus on the EU, China and the UAE.
Low vegetable oil and protein meal prices are expected to dent Canadian canola crush margins, although crush rates are currently still level pegging with year-ago volumes. End year carryout stocks are expected to plunge to 26% YoY to 1.7mn t, down even more markedly from 3mn t in 2013-2014.
Canada’s AAFC sees Canadian dollar-denominated canola prices effectively rangebound through the current crop year at $490-530/t relative to last year’s average of $489/t and 2013-2014’s $503/t.