Media reports are suggesting that China is about to ease import tariffs on soybeans, soymeal, rapeseed and fishmeal imports from neighboring Asian countries of Bangladesh, India, Laos, South Korea and Sri Lanka as the scramble begins to find alternative sources of supply given China's announced tariffs on United States soybeans.
The country is putting on a brave face although DTN analysis has suggested for some time that China will not be able to avoid the volumes that only the U.S. can supply after exhausting South American supplies.
While market reports suggest that China has been "kicking tires" in Canada's canola market, favorable signals that would signal a surge in demand remain lacking.
1) Agriculture and Agri-Food Canada has just reduced its 2017/18 canola export demand forecast for the second consecutive month to 10.8 million metric tons, while hiking ending stocks for 2017/18 by the equivalent amount.
2) Vancouver cash canola has weakened from $45/metric ton over the July contract last seen on May 16 to the current $37 over the November contract.
3) The average prairie basis, based on accessible internet bids, has shown recent weakness.
4) AAFC also recently revised lower Canada's soybean exports for 2017/18 by 1 mmt to 4.6 mmt.
5) As seen on the attached chart (blue bars), total primary elevator stocks of all grain as of week 46 is 2.9995 mmt, 14% higher than the four-year average, although canola stocks for the same week are 4.3% lower than the four-year average.
6) Primary elevator stocks of soybeans are higher than average at 132,300 mt, largely held in Manitoba elevators. This is 80% higher than the four-year average for this week, although current western rail in-transit volumes do not support large exports given a year where Canada's ending stocks are forecast to increase by 179% to a record 1 mmt.
7) Week 46 canola western rail in transit is reported at 73,700 mt, down 45.6% from the four-year average.
8) Week 46 soybean western rail in transit is reported at 17,100 mt, well-above the four-year average.
While rumors are sure to continue, time could see China draw a larger and larger radius on the map in order to obtain its needed supplies that could lead to reduced or eliminated import tariffs on Canadian product. Given the discussed hike in Canada's soybean stocks along with AAFC's estimated 100% year-over-year increase in AAFC's forecast canola stocks, timing could not be better.
DTN 360 Poll
Given that current government estimates are pointing to a large year-over-year increase in ending stocks for a number of grains, this week's poll asks which of these crops you are least likely to market prior to new-crop arrival. Please weigh in with your thoughts on this week's poll, found at the lower right side of your DTN Canada Home Page. Thanks for your participation.
Cliff Jamieson can be reached at firstname.lastname@example.org
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