Canada Markets

Canola's ending stocks currently forecast to grow almost 400% from an estimated 608,000 metric tonnes in 2012/13 to a forecast of 3 million metric tonnes in 2013/14, as forecast by Agriculture and Agri Food Canada. Ending stocks in 2012-13 were the tightest experienced since 1997-98 when ending stocks were 363,000 mt, while the 3 mmt forecast would be the highest on record, with the next highest carryout in 2010 at 2.749 mmt.

The next stocks report is to be released by Statistics Canada on Feb. 4, which will provide insight into canola stocks as of Dec. 31. There is a chance that this report will be bearish, given that producer deliveries in the first two weeks of this crop year were reported at 146,300 mt by the CGC, while Statistics Canada reported the 2012=13 carryout of 608,000 mt was reported as consisting of 408,000 mt of commercial stocks and only 200,000 mt of farm stocks. Given the CGC's producer delivery records, some 75% of the farm stocks would have been delivered in the first two weeks of August given receipts of 146,300 mt, which is virtually impossible.

Another factor pointing towards a bearish stocks report is that both exports and domestic crush for the current year are behind the pace required to meet the current AAFC forecasts of 8.2 mmt for exports and 7.2 mmt of crush, as of the most recent data.

The attached chart indicates the impact on price due to the varying levels of stocks/use ratios seen since 2000. Note that the prices utilized are crop year averages as reported by the Canola Council of Canada and reflect west coast prices. Prior to August 2012, this price represented stocks in store west coast terminals, as reported by Statistics Canada's Cereals and Oilseeds Review. Since August 2012, this price data originates from Statistics Canada's Canadian International Merchandise Trade Database.

The stocks-to-use ratio over the period shown on the chart only exceeded this year's AAFC forecast of 19.1% four times -- 24.4% in 2001/02, 23.3% in 2004/05, 21.8% in 2005/06 and 22.5% in 2009/10. The average annual price for these years ranged from $277.10 in 2005/06 to $426.20/mt in 2009/10, in store Vancouver.

The last time that ending stocks as a percentage of use were as high as they are now was in the 2009-10 crop year, when the s/u was 22.5%. The average annual price was $426.20/mt in store west coast terminals, which compares to today's track Vancouver trade at $20 over the January or $447.60/mt. While difficult to accept, could this suggest that canola remains priced high today in relation to historical periods of high stocks as percentage of use?

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

(ES)

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