USDA lowers Canadian canola export forecast

MarketsFarm — The slowing pace of Canadian canola exports, linked to the country’s trade dispute with China, saw the U.S. Department of Agriculture lower its forecast for Canadian canola exports in the current 2018-19 marketing year.

In its latest Oilseeds: World Markets and Trade report, USDA’s Foreign Agricultural Service said actual Canadian exports could end up lower still if a resolution to the trade dispute isn’t reached soon.

In its April report, USDA lowered its Canadian canola export forecast for 2018-19 to 10.6 million tonnes, which compares with an earlier estimate of 11.6 million and the 2017-18 level of 10.8 million. Agriculture and Agri-Food Canada recently lowered its own forecast for Canadian canola exports this year by a million tonnes, to 9.8 million.

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“The (Canadian canola) export pace will need to accelerate relative to last year to reach the current forecast,” USDA’s report said, “as exports for the 12-months ending in January 2019 have fallen to below 10 million tons.

“To achieve this, Canada may need a quick resolution to the current trade dispute that has cut off access to the China market for the two largest exporters, Richardson International and Viterra, in response to China’s contention that shipments have failed to meet quality standards regarding prohibited pests.”

USDA said making up the shortfall in sales to China with exports to other markets “may not be easy,” as business outside of China has remained flat or declined over the past year.

“Part of the issue is competition with soybeans, particularly from the United States, that has likely contributed to lower demand for rapeseed in the United States, Mexico and South Asia,” said USDA, adding there was also limited potential for Canada to expand canola sales to Japan.

While USDA said Canadian canola seed exporters “will face significant challenges” for the remainder of 2018-19, the demand for oil and meal was seen as steady or higher.

Despite the current restrictions on rapeseed exports to China, exports of products, meal and oil, are currently unaffected.

“In fact, exports of rapeseed meal and oil to China are up. Since the end of 2016, China’s share of Canada’s rapeseed meal exports has risen from 15 to 30 per cent,” USDA said. However, the rising share of Canadian oil and meal sales to China has come at the expense of trade with other markets, particularly the U.S.

China is forecast to import 1.325 million tonnes of rapeseed meal and 1.35 million tonnes of rapeseed oil. That compares with 1.258 million and 1.067 million tonnes, respectively, in 2017-18.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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