Stocks report slightly bearish for canola

(Resource News International) — Large Canadian canola stocks at the end of the 2007-08 crop year, as reported Wednesday by Statistics Canada, combined with expectations for a bumper 2008-09 crop, were seen highlighting the fact that there will be ample canola supplies to deal with during the current crop year, according to trade sources.

While the large carryover should put some downward pressure on prices, market participants thought most of the attention was now on this year’s production.

Canola stocks, as of July 31, were pegged by StatsCan in its quarterly stocks report at 1.541 million tonnes, compared with 1.82 million at the same point the previous year. While the stocks were down on the year, they were above average trade estimates.

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On the one hand, the larger-than-expected canola stocks should allow for good export movement as the market awaits new-crop supplies, according to a canola trader.

However, with early yield reports coming in above expectations in most areas, “it will remind people that we have quite a bit of canola to deal with,” said Ken Ball of Union Securities in Winnipeg. The market will have the largest canola supplies to deal with in history, he said, but added that the value of the products has more to do in determining price than the supplies.

Winnipeg analyst Mike Jubinville of ProFarmer Canada said the canola number was slightly bearish, but he also thought the focus would quickly turn back to 2008 production.

Wheat stocks, at 4.817 million tonnes, were well below the 6.803 million seen at the same time the previous year, but at the high end of average trade estimates. Ball thought the wheat stocks number would not be a major factor in pricing, as “quality is becoming a bigger issue more so than quantity in Canada.”

Barley ending stocks were pegged at 1.573 million tonnes, up from 1.492 million the previous year. Ball said the number was above trade expectations, but was still historically tight. He thought the fact that the country’s livestock sector is in a state of decline likely resulted in a downturn in usage. Large U.S. corn imports earlier in the 2007-08 crop year also likely cut into domestic demand for barley. “But there’s still not a huge amount of barley,” said Ball.

Statistics Canada grain and oilseed stocks in all positions report, as of July 31, 2008, in thousands of tonnes.

* — The crop year-end for corn and soybeans is August 31, 2008.

Source: Statistics Canada.

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