Agriculture and Agri-Food Canada's most recent July supply and demand estimates show ending stocks of canola unchanged from last month at 600,000 metric tons. This would be an almost full retracement to the estimated 588,000 mt carried out of the 2012/13 crop year, well-below the 2.016 million metric tons carried out from 2015/16, and the 1.778 mmt five-year average.
For a number of reasons, it may be difficult to imagine stocks falling so low.
First, let us start with week 50 Canadian Grain Commission statistics. Recent week 50 data shows commercial stocks at 840,000 mt, climbing from the previous week. In addition, there was a reported 112,300 mt of canola in-transit on western rail and 50,900 mt in-transit on the Great Lakes. This totals slightly more than 1 million tons in commercial channels, plus farm stocks. Even though producers have delivered 1.5 mmt more seed as of week 50 than the same period last year, week 50 producer deliveries totaled 306,900 mt, higher than the previous week, only slightly lower than the previous four-week average and the highest volume delivered for this week in data checked going back to 2011/12. The 2011/12-2015/16 five-year average is 259,600 mt delivered for this week. Demand report for this week by the CGC included 152,900 mt of exports and 164,000 mt of domestic disappearance.
Comparing this to the same week in 2012/13, the last time stocks ended the crop year near 600,000 mt, week 50 commercial stocks were reported at 593,300 mt, which included 73,000 mt of in-transit stocks, plus farm stocks. Tight stocks resulted in weaker movement, with only 35,600 mt of exports reported for the week and 109,600 mt of domestic disappearance. Producers only delivered 180,100 mt that week, as compared to the 306,900 mt delivered in the most recent week.
Canola disappearance remains strong, consistent with solid demand seen in United States soybeans as well as Malaysian palm oil. Most recent crush and export data was in line with previous weeks with the potential for both the annual crush and export volumes to exceed government forecasts for the 2016/17 crop year. At the same time, both basis and spreads have weakened, an increasingly bearish view held by commercial traders.
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