Canadian canola supplies may be very tight for the 2012-13 crop year, but David Reimann, market analyst with Cargill's grain marketing services department, gave a bearish outlook for the canola market in a presentation here Monday at the annual Wild Oats Grainworld conference.
Going forward, tight canola stocks should have less of an impact on prices because traders have already priced it into the market and are looking ahead to what's going to happen.
Reimann also said stocks may not be as tight as we think, because farmers have a history of under-reporting their supplies to Statistics Canada.
Canadian canola ending stocks are expected to be 350,000 tonnes in 2012-13, down from 704,000 tonnes in 2011-12, according to StatsCan data.
Much of the future of Canadian canola prices also depends on what happens in outside oilseed markets. Canola may move a little bit independently, influenced by supply and demand, stocks-to-use ratios and the Canadian dollar, but in the grand scheme of things, it will always follow along with the U.S. soy complex.
U.S. soy complex prices will be influenced by the outcome of the soybean crop in South America and weather in the U.S. this spring.
So far, the weather picture in South America is looking good, and soybean crops in Brazil and Argentina are receiving beneficial moisture during key pod filling stages, Reimann said. If all continues to go well, the region will produce a record large crop which will replenish tight stocks, and most likely push values lower.
U.S. weather conditions are also starting to improve, as recent precipitation across the soybean-growing regions has relieved some dryness. Reimann said conditions in the U.S. are looking better now than they did three or four months ago.
Acreage this spring will also be a big factor for the U.S. soy complex, and the U.S. Department of Agriculture is expecting an increase in soybean production in 2013-14, which is bearish for values. USDA expects the country to produce 92.7 million tonnes of soybeans in 2013-14, up from about 80 million in 2012-13, Reimann said.
Right now, canola prices are at fairly high levels historically, and Reimann advised farmers that now is a good time to sell, before values have the chance to crash.
Buyers should look at it as more of a hand-to-mouth perspective, because the market has the potential to move lower come springtime, he said.
-- Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.