Various commentary on the canola market over the week mentioned the notion of demand rationing, with current estimates pointing to the possibility of tight stocks at the end of the crop year, or July 31, 2021. Indeed, as is being talked about in the larger soy market, canola stocks could dip to extremely low levels if current government estimates are close to accurate.
This week’s Todd’s Take column by DTN Lead Analyst Todd Hultman (https://www.dtnpf.com/…), pointed to the need for price to ration demand, with soybean stocks poised to fall to dangerously low levels. Comments made on Thursday’s Closing Market Video points to the potential for the close above $12/bushel on the soybean market to lead to a potential quick move to the $13/bushel (bu) level, which is perhaps exactly what we are seeing in Dec. 18 trade.
Given Statistics Canada’s final production estimates, supplies of canola for the 2020-21 crop year will be roughly 21.9 million metric tons. The most recent November Agriculture and Agri-Food Canada forecasts, due to be updated this month at any time, includes 10.2 mmt of forecast exports, the same volume achieved in 2019-20 and 10.2 mmt of domestic disappearance, leaving the crop year with a carryout of 1.5 mmt, down 51.6% and the lowest in four years.
Looks good on paper, but the pace of exports through the first 19 weeks remains well-ahead of the forecast pace, as seen on the attached chart. In the latest week 19 data, or the week-ending Dec. 13, 308,600 metric tons were exported through licensed facilities, very close to the largest volume shipped in six weeks and also very close to the third-largest weekly volume shipped in the first 19 weeks or 36.5% of the 2020-21 crop year. For context, only 168,000 mt was needed to be exported this week in order to remain on the steady pace to meet the current government forecast of 10.2 mmt.
Cumulative exports are reported at 4.7996 mmt as of week 19, up 39.8% from the same period in 2019-20 and 33% higher than the three-year average. As seen on the attached chart, the blue line representing the current crop year is taking off on a trajectory of its own. This volume is roughly 1.1 mmt ahead of the steady pace needed to reach the current 10.2 mmt forecast.