With heat and dry conditions across most of the Prairies this spring and summer, any possibility of achieving this year’s projection for 20 million tonnes of canola is pretty much out the window. Even if sufficient rains were to fall, it’s still very likely production would fall well short.
Speaking with a number of traders and analysts, indications are that Canada should reap a canola crop of 16 million to 18 million tonnes. While dry conditions allowed canola to be seeded quickly, with the saving grace of rainfall to aide germination and emergence, heat and drought have forced canola to mature faster than normal. Blooms have appeared two to three weeks before they normally do, and there are a number of fields where they are shutting down early, which mean less developed pods — and, of course, less canola.
In turn, that raises major concerns about supplies as ending stocks for the 2020-21 marketing year were forecast to be 700,000 tonnes and that for 2021-22 slightly higher at 750,000 tonnes. Now the market must deal with a major shortfall and that will inevitably mean price rationing.
Not too long ago, the July 2021 contract pushed well above the $1,000-per-tonne mark as a means to deter buyers, as well as to pry away as much of the canola that was still in farmers’ bins. It may very well be that we will see prices for canola meet or exceed the highs those contracts reached in the not-too-distant future.
This week alone began with canola values struggling on some rain that did fall on parts of the Prairies and on the pretext that more was to come. That downturn culminated on July 7 when prices for the most active months lost the maximum of $30 per tonne a day. Then for the following session prices rose, and again the day after — all because of no rain and temperatures pushing higher.
To add some perspective to the overall picture, during the last five years Canada has produced an average of 20.02 million tonnes of canola. The top year within that range was 2017, at 21.46 million tonnes, and the low end only last year, at 18.72 million. At best, the coming crop might match the latter, but something lower could be lurking as canola pods struggle to fill.