Strong pace of canola crush may see slowdown

(Resource News International) — Canadian canola crushers continue to operate near full capacity, but could see a slowdown in the months ahead based on some of the marketing signals seen earlier in the crop year, according to a crushing industry official.

“Based on margins going forward, we’ll start to see the crush decline,” said an official with one large North American oilseed processor. He noted that canola oil tends to be traded six months out, which means the processors are now crushing hard based on what the price signals were six months ago.

“As you go forward and the margins get worse, you’ll start to see a decline in overall crush pace going into the third quarter,” the crushing official added.

Canadian oilseed processors were crushing canola at an annualized capacity of 95.3 per cent, according to the latest data from the Canadian Oilseed Processors Association (COPA).

As of March 25, Canadian processors had crushed 2.68 million tonnes of canola during the crop year, up from 2.62 million at the same point in 2007-08. Canada crushed a record 4.14 million tonnes of canola in the 2007-08 crop year, according to COPA data.

Agriculture and Agri-Food Canada currently estimates the total canola crush during the current crop year to come in at 4.40 million tonnes.

The industry official thought that while there might be a slowdown over the next few months, the country would still end up close to a record pace at the close of the 2008-09 crop year. With new capacity expected to open for the 2009-10 crop year, he expected to see a strong pace once new-crop canola starts becoming available.

Rob Teffaine, marketing director with Associated Proteins at Ste. Agathe, Man., didn’t expect to see the same slowdown in the crush pace as the other crushing official. Teffaine said he expected the strong crush pace would continue in the near-term as well, noting that “the market’s not telling us to do otherwise.”

Teffaine said there had been a lull in demand for canola oil in November/December, but that has picked up substantially over the last few weeks. “The market is still giving opportunities to lock in some favourable margins, not stupendous, but favourable,” said Teffaine.

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