February 23 – The IGC Thinks There’ll Be Lots of Canola Available in 2018/19

The forecasts for 2018/19 canola production are in from the International Grains Council.

What are their expectations? It’s not exactly small.

The forecasts for 2018/19 canola production are in from the International Grains Council.

What are their expectations?

It looks like there will be lots of canola and rapeseed available globally.

The International Grain Council put global canola production predictions at 74.7 million tonnes, a record high.

Harvested area was also at a record high at 91.7 million acres. This is up 1.24 million acres year-over-year.

The IGC is saying that rising canola crop area in Canada helped boost global numbers, due to its favorable prices and international demand.  

This popularity in Canada can clearly be seen through the rising interest in canola on canola rotations. It is the crop that is most likely to turn a high profit in Canada right now, and we’re hearing from many farmers that they’re going after those profits.

As such, we should all agree that record canola acres in Canada is a lock. One could argue that with an average year, we could certainly see another year of record canola production in Canada.  

From a demand side though, this increase in canola production appears to be acceptable.

Chinese canola demand continues to impress, as most recently noted by our piece on the importance of canola in the culture of the People’s Republic.

Since their own rapeseed production can’t meet all of their needs, China continues to be a very reliable guarantee for canola demand.

Thus, these market trends make the International Grain Council’s predictions unsurprising. There will be a lot of canola in 2018/19!

So, while the demand structure continues to be very strong, we are not expecting $13 CAD / bushel handles any time soon.

We might see some $12s as specials and weather premium creates some big sales opportunities but let’s keep our expectations tempered and manage risk instead.

 

World wheat output to fall this year – but not barley, corn, canola production

World wheat production will fall in 2018-19 for the first time in six years, the International Grains Council said, but corn output should show modest growth, as should the barley and rapeseed harvests.

The IGC, in details of its monthly report, cut by a second time its forecast for world wheat area for the next harvest, this time by 600,000 hectares to 217.9m hectares.

The downgrade took the estimate 1.4m hectares below the 2017-18 level, and indeed to the lowest in six years.

“Difficult weather during planting is expected to have curtailed area in India, Russia, Morocco and parts of the European Union,” the council said, while forecasting a 2.2% rise to 15.5m hectares (38.3m acres) in US seedings, and 2.4% growth to 9.2m hectares in Canadian ones.

Stocks to fall

The lower area looks poised to result in a drop of some 16m tonnes year on year, to 741m tonnes, in world wheat production in 2018-19, the first decline since 2012-13.

And this in turn will prompt a fall in inventories of some 5m tonnes, to 250m tonnes.

That would represent “the first fall in six years, but still the second largest carryover in history,” the IGC said.

It added that the decline in stocks would be focussed on exporting countries – whose supplies, in being available to the world market, are particularly important for pricing prospect – while inventories in China likely see a “further accumulation”.

‘Closing stocks could tighten’

For corn, the council, in its first forecast for 2018-19, pencilled in a marginal fall in area to a three-year low of 185.3m hectares.

Area in Ukraine will ease “because of relatively poor profitability and discouraging results”, while that in the US was forecast down some 300,000 hectares to 33.2m hectares (82.0m acres) on a harvested basis.

Brazilian area was seen rebounding by 800,000 hectares to 17.3m hectares to offset falls in Ukraine in the US, and the likes of Argentina and China too.

“Assuming normal weather and trend yields, global production is projected to increase slightly in 2018-19,” the council said, although seeing output remain behind consumption, to bring a further decline in world corn inventories.

“Owing to drawdowns in the major exporters and China, world closing stocks could tighten for a second consecutive year,” the IGC said, albeit describing inventories as staying “comfortable”.

Barley outlook

For barley, the IGC, in its first 2018-19 outlook, forecast area rising, by 900,000 hectares to a three-year high of 48.2m hectares on a harvested basis, lifted by increases in all the top producing countries – Australia, Canada, the European Union, Russia and Ukraine.

EU area was seen rising by some 400,000 hectares to a nine-year high of 12.5m hectares.

“With expanded area and assuming yields are close to the year before, world production is provisionally seen increasing by about 1% year on year,” to match roughly consumption, leaving world inventories little changed over 2018-19.

‘Favourable returns’

Rapeseed was also seen picking up area in Canada and the former Soviet Union lost to some other crops, with world harvested area pegged at a multi-year high of 37.1m hectares, up 500,000 hectares on this season’s total.

The council flagged a boost to the popularity of the crop in Canada from “anticipated favourable returns compared to alternatives, coupled with prospects for firm international demand”.

World rapeseed output was seen hitting 74.7m tonnes, eclipsing by 200,000 tonnes this season’s record high, the IGC said, while stopping short of making a forecast for carryout stocks.

H/T: Agrimoney
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.