The USDA reduced their estimate for global canola/rapeseed this month by 966,000 metric tons (mt) to 68.572 million metric tons (mmt), which would be the lowest global production in five years. A 350,000 mt reduction was seen in their forecast for European Union production this month, while Canada's production estimate was trimmed by 600,000 mt to 19.5 mmt, which is in-line with AAFC's estimate although may be challenged given the difficult harvest season faced.
Despite a slight reduction in 2019-20 global imports to 15.365 mmt, this number remains 1.1 mmt higher than the 2018-19 estimate, largely tied to an increase in European Union imports. The USDA reduced their forecast for China' canola imports from 3.6 mmt to 3.4 mmt this month, stating a shift to Canadian oil and meal imports instead. The question remains where China will source the 3.4 mmt in the forecast, given challenging growing conditions faced in Australia and the large share of China's total imports that has historically been supplied by Canada.
Total global ending stocks have been revised slightly lower to 6.444 mmt, the lowest estimate in three years. This reflects a global stocks use ratio of 9.2%, also the lowest in three years.
As seen on the attached chart, AAFC's most recent Canadian estimates point to 2019-20 ending stocks of 4.5 mmt, which reflects a stocks-to-use ratio of 23.9%. Across the years shown on this chart, this is the widest spread seen between Canada's domestic stocks-to-use and the USDA's global stocks/use estimate, or the spread between the red line and blue line on the chart, in this case, 14.7 points.
The last time this spread for the crop year was shown at double-digits was in 2004-05 when this spread hit 11.5 points and in 2005-06 when this spread hit 10.1 points, as seen on the graph accompanying this blog post. The average of the continuous future in 2004-05 crop year was $291.87/mt and the average in the following crop year was $261.34/mt
So far this crop year, or since August 1, the average on the continuous active chart is $450.37/mt down from the 2018-19 crop year average of $473.24/mt. This signals a circumstance that could change quickly, as one stroke of a pen could see Canada return to business with China with a potential to move millions of metric tons.
Meanwhile, all estimates remain tentative as prairie producers fight to get the 2019-20 crop off and dried.
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Cliff Jamieson can be reached at email@example.com
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