Actual seeded acres based on survey completed June 11 shows seeded acres for Canola at 19.84 million acres. This is an increase of 420 thousand acres from the March survey, and just 150 thousand acres off of my March number. I have reduced my yield from the 5 year average down to the 10 year average, and will easily admit my gut says end result will be lower. I also used the same harvested acre percentage as 2009 which is the most recent late frost event. Interesting to note that in 2009 even with a killer frost of similar scope and timing to this year we did still produce a 35.3bpa crop of Canola. That year however we had near greenhouse conditions before and after the frost, this year we have large areas of deficit moisture to content with. Guessing the end result isn’t what is important, estimating what is currently priced in is key. I have also reduced my export number slightly due to the fact that futures are now trading $75mt higher than they were 3 months ago. Bottom line is the focus here, and my assumptions would result in a year end next year around 740,000mt and shrinking. The most recent time we had a similar carry-out was 2011-12. Futures that year ranged between $500 and $600/mt with most of the marketing cycle between $550 and $600. We also had a 20% stronger dollar in 2011. I have talked recently about technical target of $540 to $580 on the charts, now we have “confirmed” fundamental supply data which would put us in the same range. We cleared a major “headline” hurdle today with both StatsCan and USDA posting bullish data. It is very possible that we have finally turned a corner and will be reducing carry-outs for all grains combined this year. If that is the case the lows should be in and the next question is how much will that reduction be? Time will tell, but for now at least there is a need for an upward correction to more accurately reflect today’s balance sheets, and we got just that today across grains with traded futures.
|Canola||2011-12||2014-15||2015 DLN Mar||StatsCan 2015 June 30|
|Seeded Acres ‘000||18988.9||20324.5||19995.0||19839.8|
|Harvested Acres ‘000||18753.4||19952.3||19564.6||19326.3|
|Production (‘000 MT)||14608.1||15555.1||15086.6||14508.3|
|Imports (‘000 MT)||96.6||75.0||117.8||117.8|
|Total beginning stocks (‘000 MT)||2185.8||2363.1||2043.2||2043.2|
|Total supplies (‘000 MT)||16890.5||17993.2||17247.6||16669.3|
|Total domestic use (‘000 MT)||7484.1||7250.0||7750.0||7750.0|
|Total exports (‘000 MT)||8699.0||8700.0||8500.0||8180.6|
|Total demand (‘000 MT)||16183.1||15950.0||16250.0||15930.6|
|Total ending stocks (‘000 MT)||707.4||2043.2||997.6||738.7|
|Source: StatsCan and DLN AgVentures|
I believe you can continue to be patient with Canola, the only thing holding it back is Soybeans, and they are less of a threat to oilseed prices today than they have been for some time. If you are over 10% of new crop consider buying back into market using Call options. If you are less than 10% new crop or have old crop still to sell look to scale in anytime, with $540 seeming achievable, and $580 on the outside range for now. Beware that this quick run up has left the chart vulnerable to sell all the way back to $500-505 if something bearish should occur. After a very slow start this crop year we are most certainly now in a volatile weather market.