Summary
Already smaller than last years oilseed crop, the 2009 canola crop in the major producing region hit with frost/freeze likely to place strain on major Canadian oilseed players.
Analysis
Given the most recent frost-freeze in the heavy canola production provinces of Alberta and Saskatchewan, early reports suggest an already delayed planted crop, will likely be scrutinized over the next week to ten days to provide direction if farmers may remotely consider replant or file insurance claims.
The severity of the crop damage is difficult to measure so soon after the freeze but ultimately the production of canola is likely to experience a hit in 2009.
Weather conditions for the same area racked by the frost/freeze is less than ideal as immediate forecast call for above normal temperatures and below average precipitation. As you are able to view the graph, canola end stocks have the potential to dip below a million metric tonnes and possibly reach down to levels last experienced in 2002/03.
Allendale Inc’s research is well aware of the fact, 2009/10 canola production before the frost/freeze was anticipated to fall 18% year on year and the fact canola exports use average 55% of production and crush consumes an average of 42%.
It must be noted, Canada typically is the worlds third largest producer, worlds single largest exporter and worlds fourth largest crusher of canola. Before the frost/freeze estimated end stocks for 2009/10 were projected at 1.13 million tonnes and anticipated to be an astonishing 65% fewer than year earlier levels. With less production, available new crop harvested supplies may be difficult to pry from farmer’s hands and may likely take a combined effort of a futures and basis rally at the expense of end users and crushers. Those crushers at projected risk may include the heavy weights within Canada.
To add fuel to the fire for is the existing tight old crop supplies of US soybeans and new crop soybean plantings within the nations larger supplier of Illinois, a full 29% behind its five year average is little consolation for end users. Just as new crop values of US soybean futures have risen by 36% since early March of 2009, canola futures have risen 21%.
In conclusion, be very aware of Canadian producer’s actions within the immediate future, as it likely will have a weighty impact on the processors, exporters and world wide end users..........Joe Victor
