Canada Markets
Canola's Stocks-to-Use Ratio Versus Price
Tuesday's Standing Committee on Agriculture and Agri-Food meeting, was streamed live on the internet. During it, canola producer and former industry participant Terry Youzwa stated that $1/bushel had been lost, based on the change in cash canola prices since China's trade restrictions were announced, while the industry could face another $1/bu. loss without some form of action taken.
The USDA's April Oilseeds: World Markets and Trade report highlighted Canada's challenges with respect to lost export opportunities to China, reducing its estimate for Canadian exports by 1 million metric tons to 10.6 mmt, while still well-above the 9.8 mmt estimate last released by Agriculture and Agri-Food Canada.
This month's USDA analysis saw 1.1 mmt added to the forecast for global canola/rapeseed carryout to 7.560 mmt, based on Canada's growing stocks, which represents 10.6% of estimated global annual use. This would be the highest stocks-to-use reported in four years given USDA's historical data, as indicated by the blue line on the attached chart.
The red line indicates the trend in Canada's stocks-to-use ratio for canola, based on AAFC estimates. March AAFC data estimates a 3.5 mmt carryout that represents an 18% stocks-to-use ratio, the highest in five years.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
The yellow bar represents the 2018-19 average futures value as calculated by ProphetX, using the continuous active daily chart. Since Aug. 1, this average is calculated at $483.79/mt, down from the $508.98 average calculated for 2017-18, which was the highest average calculated in five years.
This average futures price for the crop year ranges from $454.32/mt to $465.92/mt in the 2013-14/2014-15 crop years when the most recent highs in the stocks-use ratios were reported, perhaps a hint of what lies ahead in the absence of normalized trade.
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