Canada Markets

USDA Tightens Global Rapeseed/Canola Balance Sheet

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The gray bars represent the average crop-year canola future as calculated on the continuous active chart using ProphetX, while the yellow bar represents the early days of 2020-21, measured against the primary vertical axis. The blue line represents USDA's global stocks-to-use calculation, while the red line represents Canada's stocks-to-use, using Statistics Canada and AAFC data. (DTN graphic by Cliff Jamieson)

USDA's global canola/rapeseed estimates are unlikely to gain the focus placed on the much larger crops, while are prone to swings on a month-to-month basis. One month does not make a trend, but the August data is worth noting.

One of the biggest changes seen this month was a 1.5-million-metric-ton (mmt) reduction in Ukraine's production potential, from 4 mmt to 2.5 mmt. Global rapeseed production for 2020 was estimated at 68.114 mmt, down 1.7 mmt from the previous month and below the five-year average of 70.8 mmt.

Global use was revised only 197,000 metric tons lower this month to 69.802 mmt, down over 1 mmt from 2019-20 and would represent the smallest global demand in five years.

Global stocks were revised 1.4 mmt lower to 4.573 mmt, the lowest in 13 years while close to the lowest stocks seen since 2.188 mmt were reported in 2003-04.

The blue line on the attached chart shows the global stocks-to-use ratio forecast to fall for a second year to 6.6%, which is the tightest global stocks-to-use ratio calculated since 2003-04.

The red line on the attached chart represents Canada's stocks-to-use ratio, using official Statistics Canada data through 2018-19, while AAFC forecasts are used for both 2019-20 and 2020-21. This data could be due for a sharp correction. First, AAFC has forecast July 31 canola stocks at 2.5 mmt, with exports pegged at 9.6 mmt. We already know that canola flowing through licensed terminals totaled 10.124 mmt, which could further tighten stocks. July 31 stocks will be reported on Sept. 4.

In addition, USDA has forecast Canada's 2020-21 stocks at 1.281 mmt, which would be the tightest in eight years. This compares to AAFC's most recent July estimate of 2.350 mmt, only slightly lower than realized in the 2019-20 crop year.

As seen on the attached chart, the average futures price, calculated using the continuous active chart, moved above $500 per metric ton (mt) in 2016-17 for a crop-year average of $504.10/mt, when the stocks-to-use ratio for both Canada and the global market (red line and blue line) dipped into single-digit territory. The average price is calculated at $508.98/mt in the following year, or the 2016-17 crop year.

In contrast, the average price shown for 2012-13 is $610.99/mt, a year when Canada's stocks-to-use ratio fell significantly below the global ratio, calculated at 4.2% and 8.5%, respectively.

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