Canada, the biggest exporter of canola (also known as rapeseed), has shipped about 4.7 million tonnes of canola in 2012/13 through March 3, down 17 percent from the year-ago pace, according to the Canadian Grain Commission.
The small, dark oilseed is crushed mainly to produce vegetable oil, which is used to make french fries at McDonald's Corp and potato chips at Frito-Lay.
"When you look at the price of (vegetable oil) substitutes around the world, honestly I'm surprised people would buy any Canadian (canola) seed," said Tony Tryhuk, manager of commodity trading at RBC Dominion Securities. "The price-sensitive demand I think would go elsewhere. When you look at competing markets, we are expensive relative to them."
ICE Canada nearby canola futures have gained nearly 6 percent so far this year after a 14.5 percent advance in 2012. Chicago soybeans are up just over 2 percent so far this year, compared with 1 percent gains so far in 2013 for Paris rapeseed and Malaysian palm oil.
China, Japan and Mexico were the biggest importers of Canadian canola in 2011/12.
Canola's price is high in part because supplies are scarce, after a disappointing, smaller Canadian harvest last year.
"I think we're going to run out of seed in May," said Paul Erickson, senior trader in Canada with GrainCorp. By then, exports will virtually stop, he said, unless last year's crop was actually larger than the 13.3 million tonnes Statistics Canada estimated.
Analyst Don Roberts of Canolainsight.com thinks that's exactly the case, and estimates the actual size of last year's harvest was about 600,000 tonnes larger than Statscan reported.
If not for rainy weather at Port Metro Vancouver, Canada's busiest port, canola exports wouldn't be quite so far behind, he said.
"I think there's been a huge logistical problem out here on the West Coast," said Roberts, who is based in Vancouver. "There's some catching up to do."
Global palm oil exports are forecast to hit a record high in 2012/13, according to the U.S. Department of Agriculture, but USDA is forecasting U.S. soybean stocks to be the lowest in nine years at the end of the current crop year on Aug. 31.
Canadian canola exporters include Cargill Ltd, Richardson International Ltd and Viterra.
Importers that can afford to wait for new canola supplies will likely do so, Tryhuk said. Canadian farmers are expected to plant 21.3 million acres of canola this spring, according to Agriculture and Agri-Food Canada, for harvest starting in August.
There's less canola around to export because more is being crushed in Canada to produce vegetable oil and meal for animal feed.
Despite last year's smaller harvest, Canadian crushers have processed 6 percent more canola through March 6 compared to the previous year's record pace.
Crushers may shut down for maintenance in summer longer and earlier than they normally would but are not likely reduce operating rates too drastically, Roberts said.
