Canada Markets

USDA Continues to Tighten Global Canola/Rapeseed Stocks

By Cliff Jamieson , Canadian Grains Analyst
The red line represents Canada's canola stocks-to-use ratio while the blue line represents the global canola/rapeseed stocks-to-use ratio. Both will fall for the second straight year given current 2015/16 estimates. The grey bars represent the average continuous daily future for the Aug. 1 to July 31 crop year, while the yellow bar represents the average since Aug. 1, 2015. (DTN graphic by Scott Kemper)

For the third consecutive month since December data was released, USDA's Oilseeds: World Markets and Trade report shows ending stocks and stocks-to-use ratio for global canola/rapeseed falling to lower levels.

Wednesday's report shows ending stocks falling to 4.515 million metric tons, down 34.3% from the 6.871 mmt carryout reported for 2014/15. This represents a global stocks-to-use ratio of 6.5%, down from 9.6% in 2014/15. Global use of an estimated 69.428 mmt represents the first year-over-year drop in usage seen in nine years.

The tighter stocks are tied to an estimated drop of 4.5 mmt in global production estimated for 2015/16 of 67.454 mmt, falling well short of demand. Year-over-year drops in production are estimated for China (672,000 mt), India (310,000 mt), European Union (2.650 mmt) and the "other" category (1.7 mmt). An off-setting year-over-year increase in production is seen in Canada of 790,000 metric tons, according to USDA data.

The attached chart shows stocks-to-use ratios falling in 2015/16 for the second straight year to 9.8% in Canada (red line) and to 6.5% globally (blue line).

The grey bars on the chart represent the average crop year price (Aug. 1 to July 31) as calculated on the continuous daily futures chart on ProphetX, while the yellow bar represents the 2015/16 average to-date (Aug. 1, 2015, through March 9, 2016). Despite the falling stocks as a percentage of use, this average price has failed to reflect the tightening global stocks, with the crop-year average calculated at $465.92/mt in 2013/14, $454.24/mt in 2014/15 and $472.03/mt so far this crop year, as indicated by the yellow bar.

Given this situation, prices hold potential to find continued support in old-crop contracts with the potential to see a move higher in the upcoming crop year while global crops will be watched closely. AAFC's February estimates suggest track Vancouver bids in 2016/17 will range $15 to $25/mt higher than the current crop year.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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