Supply & demand
outlook for the canola
industry
J.P. Gervais
Chief Ag Economist
March 2015
Canola is one component of the
environment for oil producing crops
Growth in demand has supported the growth
of oil producing crops
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0 20 40 60 80 100 120 2000/2001 2002/2003 2004/2005 2006/2007 2008/2009 2010/2011 2012/2013 2014/2015 stock to use million tonnes
Stocks Stocks to Use
Soybeans drive oilseed markets
Source: USDA/FAS 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 thousand tonnesWorld soybean production 2014/15
Argentina 18% Canada 2% China 4% Brazil 30% India 3% Paraguay 3% Ukraine 1% United States 34% All other 5% Source: USDA-FASLarger than expected South American
soybean crop
0% 5% 10% 15% 20% 25% 30% 35% 91/92 95/96 99/00 03/04 07/08 11/12 15/16 U.S. World Projections
Lots of soybeans coming to market
Stocks-to-use ratio
'07/08 '08/09 '09/10 '10/11 '11/12 '12/13 '13/14 '14/15 '15/16 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 0% 5% 10% 15% 20% Price $/bu Stock-to-use
U.S. Soy Price vs Stock-to-use
Some downside risk exists for soybeans
Soybean forecasts differ - only way to
reconcile is to have really strong demand
Planted acres 83.5 million
Yield 46 bus/acre
Production 3.82 billion
bus.
Price $8.50 / bu
Planted acres 86.0 million
Yield 45.2 bus/acre
Production 3.86 billion
bus.
Price $9.80 / bu (Nov.)
Soybeans is only one of the drivers for canola
0 100 200 300 400 500 600 700 0 100 200 300 400 500 600 700 2000 2002 2004 2005 2008 2010 2012 2014CA$ per tonne
US$ per tonne
Canola Soybeans
Palm is king in this market
Source: USDA-FAS 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 thousand tonnesWorld palm production 2014/15
Indonesia 53% Nigeria 4% Malaysia 31% Thailand 3% Colombia 1% Papua New Guinea 1% Ecuador 1% All other 6% Source: USDA-FASThe downward trend in vegetable oil prices is
no longer matching trend in stocks
0 400 800 1,200 1,600 2,000
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
US $ per tonne
Palm oil Rapeseed Oil Soybean Oil
Biodiesel mandates will come under pressure
in this low fuel price environment
CARD – Iowa State University
0 10 20 30 40 50 60 70 -1 0 1 2 3 4 5 6 7 1/8/2010 1/7/2011 1/6/2012 1/4/2013 1/24/2014 1/23/2015
cents per pound
$ per gallon
Focus on our
Canadian canola
Our share of world canola production in
2014/15 has gone up
Australia 5% Canada 22% China 20% European Union 33% India 10% Russia 2% Ukraine 3% United States 2% All other 3% Source: USDA-FASLargest rapeseed exporter 2014/15
Australia 17% Canada 62% China 0% European Union 4% India 0% Russia 1% Ukraine 14% United States 1% All other 1% Source: USDA-FASWorld canola oil production 2014/15
Australia 1% Canada 12% China 23% European Union 38% India 9% Russia 2% Japan 4% United States 3% All other 8% Source: USDA-FASLargest exporter of canola oil 2014/15
Australia 3% Canada 65% Belarus 3% European Union 8% United Arab Emirates 6% Russia 7% Ukraine 1% United States 5% All other 2% Source: USDA-FASCanadian balance sheet for canola
has returned to long-run equilibrium
0%
5%
10%
15%
20%
25%
30%
0
4,000
8,000
12,000
16,000
20,000
2000/01 2002/03 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15Thousand tonnes
stocks-to-use
Production
Exports
Crush
Market moving sideways before
next wave of drivers
0 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015 2016 CDN$ per tonne
Source: AAFC, ICE
2016 Nov contract 2015 Nov contract
China has become Canada’s
Source: World Bank
Chinese GDP slowing,
but
does it matter?
7.4
% 5% 7% 9% 11% 13% 15% 2001 2003 2005 2007 2009 2011 2013 2015Current pace
11 25 20 56 54 14 16 5 2012 2022
very rich
Wealthy
Middle class
Poor
Middle class will carry more
weight in the Chinese economy
Source: McKinsey
1$ income -> 40
₵
in
food spending
Source: OECD / FAO
Will China oilseed
imports
continue to climb?
0 15,000 30,000 45,000 60,000 75,000 90,000 1994 1998 2002 2006 2010 2014 2018 2022 000 MT
coarse grains
oilseeds
3,000 6,000 9,000 12,000 15,000 18,000 2001 2004 2007 2010 2013 2016 2019 2022
000 MT
Protein meals Vegetable oils
Projected pace of growth in Chinese imports
of meals and oils is impressive
forecast
Growth in canola yields seem
to have gained speed…
52.0 0 10 20 30 40 50 60 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021
bushel per acre
… yet may undershoot target of 52 bu / acre
44.1 52.0 0 10 20 30 40 50 60 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021bushel per acre
Acres are on pace to meet target
implied by yield target…
0 5 10 15 20 25 30 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 million acres
Source: Statistics Canada, FCC computation
… but meeting yield target
may not even be a problem
25.9
0 5 10 15 20 25 30 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 million acresSource: Statistics Canada, FCC computation
Getting the acres is a matter of
relative prices and profit margins
Source: FCC computation 0 4 8 12 16 20
Spring Wheat Durum Feed Barley Canola Lentils (lg gr)* Peas (gr)
$ per bushel
What does Canadian production
plans look like in 2015?
-12% -8% -4% 0% 4% 8% 12% 16% 20%
Canola Durum Wheat Barley Lentils Dry peas
2015 projected growth
in acres
AAFC Reuters
Almost no variability in forecasts for canola
-12% -8% -4% 0% 4% 8% 12% 16% 20%Canola Durum Wheat Barley Lentils Dry peas
2015 projected growth
in acres
AAFC Reuters
