Tuesday's USDA Oilseeds: World Markets and Trade report shows global ending stocks increasing for the third consecutive month, with Canadian production behind the move. As indicated on the attached chart, the August report estimated the 2015/16 global carryout of canola/rapeseed at 3.382 million metric tons, down 55% from the estimated 2014/15 carryout, representing a stocks/use ratio of 5%.
Since then, global ending stocks have been increased to 4.141 mmt in September, 4.957 mmt in October and to 5.278 mmt in Tuesday's November report, an overall increase of 1.9 mmt. A look at the data reported over this time indicates Canada's canola production was estimated at 13 mmt in August, 13.3 mmt in September, in-line with Statistics Canada's July estimates, 14.3 mmt in October which equals Statistics Canada's September estimates and at 15.5 mmt in Tuesday's November report. This sets the stage for a similar move which is widely expected in Statistics Canada's next production report, to be released on Dec. 4.
Despite the easing global stock situation, November's global stocks estimates of 5.278 mmt for 2015/16 still reflects a 30% drop in ending stocks from the 7.561 mmt estimated for 2014/15. Ending global stocks as a percentage of total use are currently forecast at 7.6%, down from the 2014/15 stocks/use of 10.6%.
The USDA's forecast has also revised Canada's exports to increase by 400,000 mt to 8.2 mmt. This compares to the October Agriculture and Agri-Food Canada export estimate of 7.5 mmt, although current exports as of Nov. 1, or week 13, shows cumulative exports well ahead of this pace and also ahead of last year's pace (licensed exports only). The USDA justifies this move given a combination of higher production and higher Chinese demand, which was increased by 200,000 mt to 4.1 mmt, although down 10.8% from 2014/15.
The market is signaling an increasingly bearish situation, with basis and spreads both seen weakening. Vancouver cash canola was reported to have weakened $2/mt on Monday to $28/mt over the January future, the weakest basis seen in this market since January 8 2014 when the track market was reported at $11 over, according to ICE Canada cash data. This time last year the track Vancouver market was reported at $48/mt over the January, or $20/mt stronger.
The average prairie bid is close to the $10/bu or 440.92/mt level, with producer offerings poised to fall should cash prices move much below current levels.
Cliff Jamieson can be reached at email@example.com
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