Increasing demand for canola means opportunities for growers, says market analyst Chuck Penner.
“Even if canola supply is flat — consumption, crush and exports are up,” Penner said. “That’s a bullish situation.”
Japan was the biggest importer of Canadian canola this year, even though China has been the dominant market the past few years, he said. The European Union has been a significant buyer in recent months because Europe had a small crop last year.
Canola acres are expected to decline to just under 22 million acres this year, largely because soybeans will steal some acres in Eastern Canada, said Penner, adding stocks in Canada, Europe and China are declining.
Penner advised growers to lock in the canola basis at seeding since there is a lot of room for the basis to strengthen until about mid-June. There may be some short-term opportunities for growers to jump on.
“We can see some strength on basis and futures, so I’m friendly for canola in the short term,” he said in his presentations at the recent FarmTech conference.
Quality is the watchword for wheat markets, he said.
Wet weather meant a lower-quality crop on the Prairies last year, but Australia didn’t grow as much high-protein wheat as usual and quality in Europe, especially France, was also mediocre.
“Globally, supplies of that good-quality wheat are harder to find,” said Penner. “Ending stocks for Canadian wheat are going up, but a large chunk of that ending stock is going to be feed, or worse.”
Wheat markets are coming off their lows, he said, but how fast they move up will depend on weather.
“If the U.S. crop is in trouble, we’ll come off the lows a lot faster,” said Penner. “Even if we have U.S. stocks that are record levels and global stocks that are record levels, it still doesn’t take a long time to tip that market one way or another.”