On Friday, the USDA released the August WASDE report, which offered a few key updates to the global canola crop. Today’s report stood out thanks to lower world canola production and stronger than anticipated world rapeseed exports.
Here’s our breakdown of the numbers.
The USDA’s August WASDE report showed the market that American farmers will produce 1.52 MMT of canola in 2018/19, unchanged from the July USDA WASDE report. This estimate is roughly 7% or 94,000 MT higher than 2017/18’s production of 1.42 MMT.
Compared to the five-year average of 1.26 MMT, 2018/19 American canola production is 21% higher.
From a demand perspective, we can just look at ending stocks to get an idea of where we sit.
In particular, the U.S. government agency pegged 2018/19 ending stocks at 91,000 MT, unchanged month-over-month. That is 3% up from 2017/18’s estimate of 88,000 tonnes, but 24% below the 5-year average of 119,000 MT.
On the supply side of the balance sheet, imports are pegged at 635,000 MT, down 2% year-over-year.
On the demand side of the balance sheet, the USDA is still expecting a strong domestic crush pegged at 1.96 MMT, up roughly 11% year-over-year and 12% above the 5-year average of 1.75 MMT.
On the global market front, the USDA penciled some changes to the world rapeseed balance sheet.
On the supply side of the equation, world canola/rapeseed production in 2018/19 was lowered by 287,000 MT, or less than 1%, from last month to a little more than 72 MMT in August. This is also 2.56 MMT or 3% down from 2017/18’s estimate of 74.71 MMT. The most notable change was a drop in rapeseed production in the EU, which is down 1 MMT or 5% month-over-month to 19.2 MMT.
Notable changes on the imports front were in the EU where the USDA increased the 28-country block rapeseed import estimate by 200,000 MT month-over-month to 4.4 MMT in August. The triggers were lower domestic rapeseed crop projections and greater exportable rapeseed supplies from the Black Sea region.
On the demand side of the balance sheet, 2018/19 global exports are pegged at 17.47 MMT, up almost 3% month-over-month and up 6% year-over-year. Among the notable changes on the export front, there was a significant hike of 400,000 MT, or nearly 20% month-over-month, of Ukraine’s new crop exports to 2.45 MMT in August.
The net result is that the 2018/19 world canola/rapeseed ending stocks are now estimated at 6.41 MMT. This is 65,000 MT or 1% higher from the July report, but it is down 14% year-over-year and 8% lower than the 5-year average of 6.91 MMT.
Today’s report can be viewed slightly bearish. A stronger than anticipated pace of rapeseed imports by the EU can be viewed as somewhat bullish for Canadian producers. However, stronger than expected rapeseed exports from countries in the Black Sea region, such as Ukraine, is limiting the upside price potential for canola produced in Canada. At the time of this writing, new crop (November) canola futures in New York edged lower and traded at $504.90 CAD per MT.