Canada Markets

Week 42 Canadian canola licensed exports were reported at 78,600 metric tons (green bar measured against the primary vertical axis), covering the week ending May 22, the lowest weekly export volume in 11 weeks and the fourth lowest weekly exports seen this crop year. The four-week average is 224,700 mt.

Year-to date exports are reported at 8.2758 million metric tons (licensed exports only), which is 18.1% higher than year-ago volumes, as indicated by the red line on the attached chart, ranging from 16.6% to 21.5% above year-ago volumes for the past 16 weeks. The black line on the attached chart represents the trend in Agriculture and Agri-Food Canada's annual export forecast as a percentage of 2014/15 exports, with the most recent target of 10 mmt representing 109.1% of last year's export volume.

As of week 42, cumulative licensed exports represent a volume which is roughly 199,000 mt ahead of the pace needed to reach the 10 mmt target. Over the past two years, week 42 exports represented 76.5% of the total 2014/15 exports and 76% of the total exports recorded for 2013/14, which could extrapolate to full year export volumes reaching 10.8 to 10.9 mmt, significantly higher than the current export target. At the same time, the average over the past five years would indicate week 42 cumulative exports at 81% of the annual export volume, which would extrapolate to full year exports reaching 10.2 mmt, slightly higher than the current forecast.

While not shown, cumulative crush volumes as of the week ending May 25 totaled 6.698 mmt, approximately 40,000 mt behind the pace needed to reach the current AAFC target of 8.1 mmt. The recent week's crush of 179,485 mt was 10.4% higher than the previous week and the highest volume crushed in 10 weeks as crushers respond to favorable crush margins. Friday's Canadian Canola Board Margin Index, a proxy for returns generated crushing canola, was reported at $107.85/mt, $23.41/mt higher than reported a month ago and $36.60/mt higher than reported a year ago.

The Vancouver cash basis weakened $3/mt this week, a signal that all is not well on the export side. Cash basis levels in the country weakened further to $24.55/mt under the July on average across the Prairies, based on accessible internet bids. This is a sign of weakness given that the cash basis was calculated as narrow as $13.03/mt under on April 19.

Futures spreads also show troubling signs, with the July/Nov spread closing at a $10.60/mt inverse on May 10 while rapidly weakening in the past two days to a $5.50/mt carry.

Also not shown, the old-crop July future posted its first weekly loss in six weeks this week, while soybeans closed higher for the seventh consecutive week. Canola's July weekly chart shows a bearish outside-week trading bar this week, signaling that the current meal-driven market may have a limited impact on old-crop canola.

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