As the U.S. oilseed market focuses on dwindling stocks of soybeans, Canadian oilseed analysts are talking about running out of canola.
As of Dec. 31, 2012, Canadian canola stocks of 7.4 million metric tons were 23.6% lower than a year ago, according to a report released by Statistics Canada, Feb. 5. The stocks figure puts canola stocks in Canada at their lowest level for any December since 2006.
"We have to start rationing canola," says Wayne Palmer, senior market analyst with Agri-Trend Marketing, Winnipeg. Palmer was one of two analysts on a press call following the release of the report.
"It looks like we will run out of canola," Palmer states.
While canola stocks came in at the high end of trade estimates, Palmer says stocks are irrelevant. Over the past three weeks, Canadian canola prices have surged $55/ton.
"Canola prices will continue to tag along with the soybean market," Palmer says.
Canola production of 13.3 million metric tons in 2012 was a 9% drop from 2011 output of 14.6 million tons. Lower-than-expected canola production was the result of reduced yields from a growing season marked by warm temperatures, moisture stress, and disease.
Wheat and other grains will likely replace canola during planting, says Palmer. "Producers will look to crops that are not as frustrating to grow," he says.
Canada’s Agriculture and AgriFood Canada farm ministry recently released data that showed Canada producers are expected to plant 100,000 fewer acres to canola in 2013, a 1.3% decrease from last year.
Wheat Stocks Declining as Well
Total wheat stocks as of December 31, 2012, fell 0.7% to just under 20.7 million metric tons, compared with a year earlier. On-farm stocks of wheat rose 1.7% to 16.5 million metric tons, while commercial stocks fell 9.1% to 4.2 million tons, according to Statistics Canada.
"Wheat stocks are 1 million tons below expectations," says Brian Voth, senior market coach with Agri-Trend Marketing. "Elevators are saying by the end of March they won’t have any more wheat."