Despite prior year revisions where Statistics Canada boosted production and ending stocks for both 2013/14 and 2014/15 above expected levels, latest supply and demand tables suggest that crushers and exporters will fight over a supply of 15.765 mmt, 3.718 mmt or 19% lower than last year, given this year's smaller crop. Current estimates suggest that exporters will bear the major hit in volumes, moving 7.1 million metric tons in 2015/16, which is down 2.031 mmt or 22.2% from last year. This is due to lower supplies on the Prairies, but also the challenges expected in the well-supplied global oilseed and vegetable oil markets.
Domestic crush, however, is estimated to fall only 357,000 mt or 4.9% from the record 7.357 mmt crushed in 2014/15 to 7 mmt, despite a significant increase in crush capacity on the Prairies in the past year. The Canola Council of Canada states that crush capacity is "about 10 million metric tons." Given estimates for 7 mmt of crush and 7.1 mmt of exports, this suggests a near-even split in demand and would be the closest domestic use has come to meeting or exceeding export volumes. This level of demand is suggested to lead to a year-end carryout of 1.5 mmt, which would be slightly behind the five-year (2011 to 2015) average of 1.762 mmt.
In all likelihood, production estimates will be pushed higher in the October 2 Production of principal field crops report, given reports of higher-than-expected yields in many areas. Statistics Canada's model-based estimates suggested a crop which is 1.1 mmt higher than their first survey-based estimate. Production was increased to 14.439 mmt, while provincial government estimates could suggest a slightly larger crop.
Bottom line: larger-than-forecast exports and crush may be required to prevent a year-over-year increase in stocks. As of week 7, or the week ending September 20, cumulative licensed canola exports are reported at 1.1225 mmt, 13.2% higher than year-ago volumes. Licensed exports are also approximately 166,730 mt ahead of the cumulative pace needed to achieve the recently revised export target of 7.1 mmt.
Domestic crush, on the other hand, is facing a slightly slower start. As of Sept. 23, COPA's cumulative domestic crush is reported at 1.0217 mmt, down 1.5% from the same week last year and 55,160 metric tons behind the cumulative pace needed to reach the 7 mmt target. Monday's Canadian Canola Board Margin Close, a proxy for returns generated crushing canola, is reported at $48.39/mt, down 45.7% from last year and is providing less incentive to crush, which has led to a reported 68.4% crush capacity utilization since August 1, down from 79.5% one year ago.
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