The record canola stocks estimate reported by Statistics Canada as of Dec. 31 may not be supported by weekly commercial stocks data reported by the Canadian Grain Commission.
As of Dec. 31, Statistics Canada estimated total stocks reaching a record level of 14.6 million metric tons, up 4.9% from the previous crop year. While on-farm stocks were estimated to increase 6.3% year-over-year to 13.4 mmt, commercial stocks were estimated to fall 100,000 mt, or 7.7%, to 1.2 mmt as of Dec. 31.
Fast-forward to week 28, or the week ending Feb. 10, where commercial stocks were reported at 994,700 metric tons, the lowest stocks reported since week 8, or 20 weeks. This is also 385,500 mt, or 28%, lower than the same date last crop year and 26% below the five-year average for this shipping week.
A number of factors could be behind this drawdown in stocks. Brutally cold weather across the Prairies in recent weeks may have contributed to a lack of movement. In week 28, producers delivered 253,800 mt, the smallest volume delivered in five weeks. Cumulative producer deliveries at 10.2598 mmt as of week 28 are down 5.2% from the same period last crop year and the smallest cumulative deliveries seen in three years in this 28-week period.
Producers may simply lack the need to sell. In early January, ICE Canada commentary indicated that producers were largely current in terms of cash sales, indicating that further sales may not be entertained until mid-February or later. Canola's typical seasonal trend would normally provide sellers an incentive to hold stocks into the spring.
There are a number of questions surrounding the demand side of the equation this crop year, with one sign worth watching is a $2/mt weakening of the Vancouver cash basis reported on Feb. 14. Over the past two years, Vancouver cash basis has strengthened over the month of February, while has strengthened modestly over the month on average over the past five years. In three of the five years, Vancouver cash remained either unchanged or showed signs of strength over the month.
While there may be no sudden urgency with commercial stocks dipping lower, it is interesting to note that over the past five years, the volume of commercial stocks has fallen an average of 39% from the volume reported in week 28 to the week 42/43 low reached in May and as much as much as 52% in one of the five years. This bears watching in the weeks ahead.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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