Canada Markets

Tighter Canola Stocks Fail to Stir Bullish Sentiments

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart shows the trend in the March 31 stocks of canola as reported by Statistics Canada (blue bars), along with the July 31 Stats Canada stocks (red bars), with the black line representing the difference, or usage. The 2013 July 31 stocks represent the current carry-out projection. Today's report indicated the lowest March 31 stocks since 2005. (DTN graphic by Nick Scalise)

The industry was fully expecting a tighter March 31 stocks number for Canadian canola in today's report. Commodity News Service reported the pre-report estimate to be 4.2 million metric tonnes, while a Reuter's poll pegged the pre-report estimate at 4.1 mmt. This compares to last year's 5.2 mmt on the same date.

While the trade received a surprise with the actual report releasing an inventory figure of 3.909 mmt, the lowest March 31 stocks level since 2005 when it was reported at 3.739 mmt, markets didn't show much interest either way. Within an hour of the release, canola futures hit their session low of $596.20. By that time, U.S. soybeans were rallying; in fact, a U.S. analyst suggested by Twitter that beans were rallying as a result of the cut in canola stocks. Today marks the second day of the July canola future fighting to stay above the psychological $600/mt level, while this week's close is $37.60/mt below the contract high of $639/mt.

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The old-crop situation is also compounded by the late start to planting across the Prairies which continues to push back the available supply of seed off the combine. Despite this, spreads fell today, with the old-crop May/July spread falling $4/mt to $29/mt and the July/Nov spread, a gauge of old-crop sentiment as compared to new-crop, also falling by $1.40/mt to $60.10/mt. These spreads are determined by the actions of the commercial traders who are failing to signal their concern.

The attached chart shows the Stats Canada stocks as of March 31 (blue bar) along with the July 31 stocks (red bar) along with the black line that measures the difference between the two. The July 31 ending stocks for 2013 is the current forecast of 350,000 mt as determined by Agriculture and Agri-Food Canada. Today's data would result in the lowest usage number (3.559 mmt) for the final four months of the crop year since 2008, when disappearance totaled 3.127 mmt. This forecast usage would also be 19% below the average usage of the past three years.

While time will tell, it appears that the trade simply does not accept this data as portraying an accurate snap-shot of the canola situation. Please feel free to e-mail and tell me your thoughts.


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

(AG)

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