Here’s a question from a farmer in southern Manitoba:
“My canola crop looks really good, so far (fingers crossed). What is in the cards for canola going forward? It sure doesn’t look like the Huawei thing is getting resolved anytime soon.”
This is the classic $64,000 question. FarmLink would like to give a clear and concise outlook on canola (and all the other crops) but, ultimately, there is no crystal ball. There’s an adage that says grain prices are heavily influenced by weather and politics. It is safe to say that canola is a resident squarely within that vortex.
A robust domestic crush and better than anticipated exports have pushed 2019/21 ending stocks towards 3 MMT – by no means bullish, but it provides a more favourable starting point for 2020/21. Ending stocks are forecast to drop to 2.4 MMT in the coming marketing year. This heightens the importance of the growing season. If canola yield prospects diminish due to adverse weather, all other things equal, ending stocks will tighten. More likely, canola yield prospects improve, and Canadian yields approach 44 bu/acre. Such an outcome would keep ending stocks and price prospects relatively flat, year-on-year, in 2020/21.
Of course, complicating matters is Huawei’s CFO extradition, the “two Michaels,” and the G5 turmoil between China and Canada. There is no obvious pathway towards a resolution. Canada needs the Chinese market. The EU market provided the necessary incremental export demand in 2019/20. Canada needs that demand-pull again in 2020/21.
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