Canada Markets

The Canadian Grain Commission's week 28 report as of Feb. 11 shows 305,000 metric tons of canola delivered into licensed facilities over the week, which is the lowest volume delivered for this particular week in three years and below the five-year average for the week.

Cumulative deliveries as of week 28 are pegged at 10.8258 million metric tons, a volume that is 463,800 mt or 4.1% lower than 11.2896 mmt delivered in the same period in 2016/17. This remains a troubling statistic given that current government statistics indicate that crop year supplies are close to a million metric tons higher than last year, while we move closer to the delivery challenges faced in spring with muddy yards and road bans.

Over the past five years, CGC statistics show that an average of 56.1% of crop year deliveries of canola are made as of week 28. This average projects to crop year deliveries of 19.297 mmt by the end of the current crop year, which would continue to lag crop year deliveries realized in 2016/17.

The CGC's primary elevator statistics show how producers have responded across the Prairies. While Manitoba canola production is estimated to have increased by 20.7% in 2017 from the year prior, producer deliveries into primary elevators are 10.9% higher than the same period in 2016/17. Saskatchewan producers increased production by 4.7% year over year, while year-to-date elevator deliveries have contracted by 1.8% year-over-year. Current estimates point to Alberta increasing production by 10.9% year-over-year, while producer deliveries into licensed primary elevators have fallen by 6.1% year-over-year.

It's also interesting to note that this has happened over a period when producer deliveries of dry peas into licensed bulk channels has fallen by 41% from the previous year and the delivery of lentils into bulk channels has fallen by 50% year-over-year, given weak export opportunities. A slowing in pulse deliveries has not resulted in increased cash flow selling of canola.

If the current estimates pointing to record stocks of canola and suggestions that 2017/18 ending stocks are getting bigger and bigger are correct, it has not made it easier for buyers. The Vancouver cash basis strengthened $4/mt on Friday to the strongest cash basis seen since August. The average prairie basis has strengthened $2/mt since mid-week and at $18/mt is roughly $5/mt stronger than seen in early January and about $12/mt stronger than this time last year.

The nearby March/May spread closed at minus $5.10/mt (May trading over the March) this session, strengthening for the fifth straight week after reaching a low of minus $8/mt on Dec. 11. This signals a move from a bearish view of fundamentals to a neutral view as determined by the actions of commercial traders.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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