Recent week 35 data from the Canadian Grain Commission presented data which covers the first eight months or two-thirds of the 2012/13 crop year. Canola's total disappearance of 9.718 million metric tonnes as of week 35 is 13.6% behind this time last year, although 4.6% ahead of the three-year average for this period of time.
As seen on the attached chart, the colored columns represent the total disappearance as seen at week 17, approximately the 1/3 mark in the crop-year, week 35, which represents the 2/3 mark within the crop year, while the last column represents the forecast for 2012/13 as presented by Agriculture and Agri-Food Canada, which is the week 52 column.
The two upward sloping lines in the chart represent the total disappearance at each of the three points in time over the 2011/12 crop year (blue line) and the average of the past three years (red line). These are merely for reference to understand how the industry has scaled back from past years.
The chart indicates total demand or usage at 5.15 mmt in the first one-third of the crop year and 4.568 mmt of usage in the next one-third of the crop year, taking us to the current week 35. Given the current forecast of 13.789 mmt of total usage, leaving a 350,000 metric tonne carryout, this logic could suggest that total demand or usage will be 4.071 mmt in the final four months of the crop year.
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The question is, will current supplies allow a continuation at current usage? Week 35 usage, export and crush combined, was 251,600 mt. At this rate, there is enough product to stretch out 16 weeks, or the second last week of July. The average weekly disappearance for the previous five weeks was 260,000 mt, which would take us to less than 16 weeks.
Other things that will affect demand will be seeding, road bans and muddy yards, as well as the annual plant maintenance slowdowns at the various crushers. On the flipside, suggestions are made that canola may be playing catch-up on the West Coast as canola had to split capacity with wheat shipping which took place earlier than most years, while rainy weather may have also acted to slow shipping progress.
There may be slim pickings for product in August, while users will be patiently waiting for those first combines to roll. The July/November spread will be a sign of old crop supply problems. While this spread hit a high of $65/mt in September, it retraced to $35.40/mt in January 2013 and is currently sitting at $48.20/mt.
DTN's Poll last week revolved around the deregulated grain marketing environment in Western Canada and the impact it has had on the readers' operations. Of those who responded:
-- 13% suggested that deregulation has increased challenges and risks within their operation
-- 67% viewed deregulation as having created opportunities that have enhanced their operation.
-- 4% responded that deregulation had little or no impact
-- 12% indicated that the de-regulated environment did not apply to their operation, and
-- 4% responded to Choice 5, which was "Other".
Please respond to this week's DTN 360 Poll on your homepage which deals with the use of commodity options as a means of managing price risk.
Cliff Jamieson can be reached at email@example.com
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