Canada is the world's biggest producer of canola, which is mainly used to make vegetable oil for foods like potato chips and salad dressings. Statistics Canada pegs this year's harvest at 14.7 million tonnes, but many traders and analysts expect output to be even higher.
A bountiful harvest is just what Canadian crushers and seed exporters need after last year's 13.9-million tonne harvest left skimpy supplies by summer that inflated prices.
"We should have a fairly consistent or fluid pipeline for this entire year," said Dean McQueen, vice-president of merchandising and transportation at Viterra, one of Western Canada's two biggest crop handlers and owner of a canola plant in Manitoba.
This year's bumper crop comes amid concerns that hot, dry weather will trim production of U.S. soybeans, a rival to canola in the global vegetable oil market.
Even so, the U.S. Department of Agriculture forecasts global soybean production of nearly 282 million tonnes in 2013/14, an increase of 5 percent from the previous year. The world canola/rapeseed harvest is forecast around 66 million tonnes, up nearly 7 percent, while global palm oil output of 58 million tonnes also looks to rise 5 percent, according to USDA.
There are few worries, however, that canola demand can keep pace with supply.
"The cupboard was pretty bare at the end of (2012/13), so I don't see us having a huge excess of production lying around," said Kevin Price, senior trader for the Canadian office of Singapore-based Agrocorp International.
"Canola can differentiate itself in the market quite well."
The industry markets canola oil as one of the healthiest vegetable oils, due to its low level of saturated fat.
Agriculture and Agri-Food Canada estimates that Canadian canola exports will climb by 450,000 tonnes or 6 percent in 2013/14 due to larger supplies and strong global consumption.
Canada exported 7.2 million tonnes of canola seed in 2012/13, down 16 percent from the previous year. China was the biggest export destination, followed closely by Japan.
Japanese purchases should remain steady, Price said, while Chinese buys are harder to predict.
"If the price is right, (China) will continue to buy," he said.
Canada accounts for about 59 percent of global exports of canola, also known as rapeseed, followed by Australia and Ukraine.
Crushers See Rebound From Slower Year
The crushers who belong to Canadian Oilseed Processors Association (COPA) processed 6.7 million tonnes of canola seed in 2012/13 (August/July), falling short of the previous year's record-high 7 million tonnes.
"You're going to see a much higher crush number this year than we saw last year," said Ken Campbell, vice-president of North American softseed crushing for Archer Daniels Midland .
The Illinois-based agribusiness giant, which operates two Canadian crushing plants, sees Canadian crushings of up to 7.5 million tonnes in 2013/14.
Crushers only used about 83 percent of their capacity in 2012/13, down from nearly 89 percent in the previous year. That was partly due to high canola prices that pinched margins.
But with prices tumbling as the new harvest arrives, margins on Wednesday were around $109 per tonne based on nearby futures contracts, up 43 percent from a month ago.
"I'm optimistic that the crushers are going to battle it out versus the exporters for seed," Campbell said, adding that exporters will still likely claim most of the new crop.
The United States and China were the biggest importers in 2012/13 of Canadian canola oil, used for producing vegetable oil and biodiesel, and look to be big buyers again, McQueen said.
The U.S. also accounts for about 90 percent of exports of canola meal, used largely as animal feed.
Down the road, Canadian crushers will need even bigger supplies. ADM expects to complete construction of Canada's largest biodiesel plant at Lloydminster, Alberta within weeks, while Louis Dreyfus Commodities, Bunge Ltd and Richardson International are all expanding.
Cargill Ltd is building a new plant at Camrose, Alberta.
A bountiful harvest is just what Canadian crushers and seed exporters need after last year's 13.9-million tonne harvest left skimpy supplies by summer that inflated prices.
"We should have a fairly consistent or fluid pipeline for this entire year," said Dean McQueen, vice-president of merchandising and transportation at Viterra, one of Western Canada's two biggest crop handlers and owner of a canola plant in Manitoba.
This year's bumper crop comes amid concerns that hot, dry weather will trim production of U.S. soybeans, a rival to canola in the global vegetable oil market.
Even so, the U.S. Department of Agriculture forecasts global soybean production of nearly 282 million tonnes in 2013/14, an increase of 5 percent from the previous year. The world canola/rapeseed harvest is forecast around 66 million tonnes, up nearly 7 percent, while global palm oil output of 58 million tonnes also looks to rise 5 percent, according to USDA.
There are few worries, however, that canola demand can keep pace with supply.
"The cupboard was pretty bare at the end of (2012/13), so I don't see us having a huge excess of production lying around," said Kevin Price, senior trader for the Canadian office of Singapore-based Agrocorp International.
"Canola can differentiate itself in the market quite well."
The industry markets canola oil as one of the healthiest vegetable oils, due to its low level of saturated fat.
Agriculture and Agri-Food Canada estimates that Canadian canola exports will climb by 450,000 tonnes or 6 percent in 2013/14 due to larger supplies and strong global consumption.
Canada exported 7.2 million tonnes of canola seed in 2012/13, down 16 percent from the previous year. China was the biggest export destination, followed closely by Japan.
Japanese purchases should remain steady, Price said, while Chinese buys are harder to predict.
"If the price is right, (China) will continue to buy," he said.
Canada accounts for about 59 percent of global exports of canola, also known as rapeseed, followed by Australia and Ukraine.
Crushers See Rebound From Slower Year
The crushers who belong to Canadian Oilseed Processors Association (COPA) processed 6.7 million tonnes of canola seed in 2012/13 (August/July), falling short of the previous year's record-high 7 million tonnes.
"You're going to see a much higher crush number this year than we saw last year," said Ken Campbell, vice-president of North American softseed crushing for Archer Daniels Midland .
The Illinois-based agribusiness giant, which operates two Canadian crushing plants, sees Canadian crushings of up to 7.5 million tonnes in 2013/14.
Crushers only used about 83 percent of their capacity in 2012/13, down from nearly 89 percent in the previous year. That was partly due to high canola prices that pinched margins.
But with prices tumbling as the new harvest arrives, margins on Wednesday were around $109 per tonne based on nearby futures contracts, up 43 percent from a month ago.
"I'm optimistic that the crushers are going to battle it out versus the exporters for seed," Campbell said, adding that exporters will still likely claim most of the new crop.
The United States and China were the biggest importers in 2012/13 of Canadian canola oil, used for producing vegetable oil and biodiesel, and look to be big buyers again, McQueen said.
The U.S. also accounts for about 90 percent of exports of canola meal, used largely as animal feed.
Down the road, Canadian crushers will need even bigger supplies. ADM expects to complete construction of Canada's largest biodiesel plant at Lloydminster, Alberta within weeks, while Louis Dreyfus Commodities, Bunge Ltd and Richardson International are all expanding.
Cargill Ltd is building a new plant at Camrose, Alberta.
