Canada Oilseeds and Products Annual Report 2009

A Hot Tip about Agriculture and Animal Husbandry in Canada

Posted on: 4 Jan 2010

Assuming a return to normal yields, total Canadian oilseed production during 2009/2010 is forecast to decrease to 15.1 million metric tons (MMT) from 16.1 MMT produced a year earlier. Higher profitability due to tight oilseeds supplies world-wide and a continued strong demand is expected to spur an expansion in canola acreage at the expense of wheat acreage.

Required Report - public distribution Date: 4/20/2009 GAIN Report Number: CA9023 Canada OILSEEDS Oilseeds and Products Annual Report Approved By: Robin Tilsworth Prepared By: Darlene Dessureault Report Highlights: Assuming a return to normal yields, total Canadian oilseed production during 2009/2010 is forecast to decrease to 15.1 million metric tons (MMT) from 16.1 MMT produced a year earlier. Higher profitability due to tight oilseeds supplies world-wide and a continued strong demand is expected to spur an expansion in canola acreage at the expense of wheat acreage. High carry-in stocks in canola and in soybeans are expected to off-set production decreases, resulting in supplies similar to 2008/2009 levels. Increased crush capacity in canola and a continued strong world food and biofuel demand for canola oil will draw down canola stocks in 2009/2010. Sunflower seed production is expected to increase by 3% but sunflower seed production accounts for a very small percentage of oilseed production and therefore the increase in tonnage will not be enough to significantly offset the production decreases in the canola. Executive Summary: Assuming a return to normal yields, total Canadian oilseed production during 2009/20010 is forecast to decrease to 15.1 million metric tons (MMT) from 16.1 MMT produced a year earlier. Higher profitability due to tight oilseeds supplies world-wide and a continued strong demand is likely to result in canola acreage being increased at the expense of wheat acreage. High carry- in stock in canola and in soybeans are expected to off-set production decreases, resulting in supplies similar to 2008/2009 levels. Increased crush capacity in canola and a continued strong world food and biofuel demand for canola oil will draw down canola stocks in 2009/2010. Sunflower seed production is expected to increase by 3% but sunflower seed production accounts for a very small percentage of oilseed production and therefore the increase in tonnage will not be enough to significantly offset the production decreases in the canola. Commodities: Oilseed, Rapeseed Oilseed, Soybean Oilseed, Sunflowerseed Author Defined:Summary: Total Oilseeds Planting intentions were not available at the time of this outlook. Forecasts are therefore based on government statistics, historical trends and media reports. On balance, total Canadian oilseed output (canola + soybean + sunflower seed) during 2009/2010 is forecast to reach about 15.1 million metric tons (MMT), a 6% decrease from the record setting 16.1 million metric tons produced a year earlier. While area is forecast to increase, a 7% decrease in canola production is forecast with the assumption of a return to normal yields. Soybean production levels are expected to stay the same as the previous crop year levels. Sunflower seed production is expected to increase by 3% but sunflower seed production accounts for a very small percentage of oilseed production and therefore the increase in tonnage will not be enough to significantly offset the production decreases in the canola. While world demand for oilseeds has remained steady in 2008/2009 and tight world supplies in 2009/2010 due to a drought in South America may result in oilseeds being higher in profitability than other crops in 2009/2010, Canadian seeding decisions to oilseeds are restrained by rotational limitations and the fact that they are also highly input dependant (especially canola). Summary: Total Meals Total oilseed meal production in Canada (canola and soybean) in 2009/2010 is forecast to reach 3.9 MMT, a 6% increase from the previous year?s levels of 3.7 MMT. A 4% increase in soybean meal production is expected due to a forecasted increase in soybeans going to crush. Increased in canola crush capacity in 2009/2010 is expected to also result in more canola going to crush resulting in a 7% increase in canola meal production Canada is a net exporter of canola meal and a net importer of soybean meal. Canola meal exports are expected to increase by 5% in response to increased supplies resulting from increased crush capacity. Most will likely go to the U.S. market where it is used in dairy rations and as an organic fertilizer. Canola meal exports to the United States have been trending upwards due in part to increased competition for corn by the biofuels industry which has made canola meal an attractive, less expensive alternative to corn for the livestock industry. Soybean meal imports come almost exclusively from the U.S. are expected to increase 5% in 2009/2010. Soybean meal is used as feed by the livestock and poultry industry. The Chicken Farmers of Canada recently announced that they would be concentrating marketing efforts on raising Canadian consumption of chicken. This could push domestic production of chicken up and in turn push up domestic demand for soybean meal up. Summary: Total Oils Total Canadian production of oil from oilseeds in 2009/10, is expected to increase by 7%. This increase is due almost entirely to the increase in canola oil production resulting from increased supplies due to increased crush capacity. Exports for canola oil are forecast to increase 6% in 2009/2010 to 2.1 MMT from 2.0 MMT the previous year reflecting the increased supplies and continued strong demand for rapeseed oil in the United States and Pacific Rim markets. Quality Reports Much of the responsibility for the quality of Canadian grain and oilseeds entering domestic and international markets belongs with the Canadian Grain Commission (CGC). The CGC?s annually publishes ?Harvest Reports?. These reports describe the quality of Canadian oilseeds surveyed from the annual harvest in the Prairie Provinces and in Ontario. For example, the 2008 harvest report for canola reports that the western Canadian canola crop in crop year 2008/2009 was characterized by near record oil content, lower protein content and much reduced chlorophyll levels when compared to the 10-year means. For soybeans, the 2008 harvest report indicates that oil and protein content was average but that there were wide regional variations. More information on the 2008 canola crop can be found at: http://www.grainscanada.gc.ca/canola/hqcm-mqrc-eng.htm More information on the 2008soybean crop can be found at: http://www.grainscanada.gc.ca/soybeans-soja/hqsom-mqrso-eng.htm Commodities: Oil, Rapeseed Meal, Rapeseed Oil, Rapeseed Production, Supply and Demand Data Statistics: Canola (Rapeseed) Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas Canola (Rapeseed) Meal Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, Canola Council, World Trade Atlas Canola (Rapeseed) Oil Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas, Canola Council Author Defined: Canola Highlights In 2009/2010, strong world demand for oilseeds, due to tight supplies and a drought in South America, as well as high world wheat supplies may encourage farmers to switch from wheat to canola. However, rotational limitations and a return to normal yields are forecast to result in a lower production. Canola yields in 2008/2009 were exceptionally high due to ideal weather conditions. Therefore, despite indications that Canadian prairie farmers may be seeding a record area of canola, a return to normal yields is anticipated which will result in a 7% decrease from the previous year?s production levels. Canola production for 2009/2010 is forecasted at 11.7 MMT. It is still too early to determine if the flooding of the Red Deer River in Manitoba will affect the planting intentions. Although the flooding is being reported as a ?disaster? it is not necessarily an agronomic one. Most of the losses involve people losing their homes. Disastrous floods in 1997 led many agricultural producers to move their farms to higher grounds and built dykes around the lower lands. There is still time for the water to run-off and the land to be dry enough to begin seeding in May. The forecasted 7% decrease in canola production will likely be off-set by the high carry-in stocks resulting from the previous year?s bumper crop. As a result, supplies in 2009/2010 are expected to be close to 2008/2009 levels. An increase in crush capacity is expected to result in stocks being drawn down 10% in 2009/2010 to 2.3 MMT from 2.6 MMT. Canola crushers in Canada have been operating at near full capacity, in part due to high supplies. High demand for canola oil has been driving the crush pace. A slow down in the next few months is expected as canola oil is traded six months out so crushers are operating on prices from 6 months ago. The crush in the current crop year is expected to still reach record levels. Crush is nevertheless forecast to remain high in the next crop year due to anticipated high supplies, increased crush capacity (the James Richardson International plant in Yorkton, Saskatchewan is expected to come on line in the second quarter of 2010, and the TRT ETGO plant near Trois Rivière, Quebec is expected to come on line in the first quarter of 2010), and sustained high demand for canola oil from both the food industry and the biofuels industry. The demand for industrial use of canola in bio-diesel in Canada remains uncertain but promising. In June, 2008, the federal government passed legislation through Parliament that allows the government to mandate renewable fuel content in transportation fuel, including diesel. A federal renewable fuels standard for gasoline is expected to come into force sometime in 2010, and the renewable fuels standard for diesel is expected to come into force two years later (2012). There is increased interest in increasing bio-diesel production capacity in Canada. Biodiesel supplier Canadian Bioenergy Corporation, and crop-processing giant Archer Daniels Midland Company (ADM), announced in early April 2009 that they have entered into negotiations to form a joint venture to construct a large scale canola-based biodiesel production facility in Lloydminster, Alberta. The plant/project under study would produce 265 million liters (70 million gallons) of canola-derived biodiesel a year, requiring an annual supply of 240,000 tons of canola oil, crushed from 600,000 tons of seed. Plans for a slightly smaller, 225 million liter canola biodiesel plant near in Sturgeon, Alberta (near Edmonton) had been announced by Canadian Bioenergy in October of 2007. Whether or not the Edmonton project goes forward could depend on the results on the joint-feasibility study with ADM. Factors that will be taken into account include the weakened Canadian dollar which strengthens export prospects and the increased construction costs. If the project goes forward, construction is expected to begin in the last quarter of 2009 and be complete by the first quarter of 2011. This announcement is good news for the Canola Council of Canada, who is pushing hard for the biodiesel mandate implementation date to be moved up after the Alberta Renewable Diesel Demonstration (ARDD) study affirmed the functionality of canola as a feedstock for renewable diesel in cold weather conditions. The intended customers for the proposed Lloydminster biodiesel plants are the oil companies. The proposed plant?s 265 million liters per year of canola-based biodiesel would represent close to 50% of the 520 million liters of bio-diesel the government of Canada estimates would be required to meet a 2% biodiesel mandate in 2012. On the food side, canola oil continues to enjoy increased popularity as a ?healthy oil?. Canola oil exports are expected to increase 6% in 2009/2010 in response to high domestic supplies due to increased crush capacity and a continued strong demand internationally. A health accreditation from the FDA in the United States and the switch to canola oil by several fast-food franchises, such as Canadian Kentucky Fried Chicken has helped raise its profile. The canola industry continues to aim for 15 million tons by 2015 and states that they are ahead of schedule. Crush Capacity Utilization According to the Canadian Oilseed Processors Association, the utilization of canola crush capacity in Canada over calendar year 2007 increased by nearly 10% over year 2007 levels. This increase was driven by high world prices. 2002 Jan-Dec 53.8% 2003 Jan-Dec 67.4% 2004 Jan-Dec 84.7% 2005 Jan-Dec 84.5% 2006 Jan-Dec 93.7% 2007 Jan-Dec 87.5% 2008 Jan-Dec 97.9% Commodities: Oilseed, Soybean Meal, Soybean Oil, Soybean Production, Supply and Demand Data Statistics: Soybeans Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas Soybean Meal Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas Soybean Oil Data sources: Canadian Oilseed Processors Association (COPA), Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas Author Defined: Soybean Highlights Soybeans are primarily grown in Ontario (approximately 82% of Canadian production) and Quebec (15%), with a small amount grown in Manitoba. In 2009/2010, a very small increase in acreage combined with a return to average yields is forecasted to result in a marginal increase in soybean production. Supplies in 2009/2010 are nevertheless expected to increase 4% due to high carry-in stocks. Increased supplies, due to an increase in domestic crush capacity, are expected in 2010. The new TRT ETGO plant in Trois Rivière, Quebec is scheduled to come on line the first quarter of 2010. The plant that is designed to switch between soybean and canola and current expectations are that it will crush 400,000 tons of soybeans a year. Increased supplies are expected to result in increased usage by the domestic livestock feed sector. Increases in domestic demand are not forecast to be high enough to off-set higher supplies and stocks will increase in 2009/2010. Crush Capacity Utilization According to the Canadian Oilseed Processors Association, the utilization of soybean crush capacity in Canada in calendar year 2008 decreased from 2007 as shown below. Canola Soybeans 2002 Jan-Dec 84.8% 2003 Jan-Dec 84.5% 2004 Jan-Dec 70.0% 2005 Jan-Dec 79.4% 2006 Jan-Dec 67.9% 2007 Jan-Dec 67.1% 2008 Jan-Dec 59.6% Commodities: Oilseed, Sunflowerseed Production, Supply and Demand Data Statistics: Sunflower Seed Data sources: Statistics Canada, Agriculture and Agri-food Canada, World Trade Atlas Author Defined: Sunflower Seed Highlights Canadian production of sunflower seeds in 2009/2010 is expected to increase marginally, from 112 TMT to 115 TMT due to a small increase in acreage. Canadian sunflower seeds are primarily marketed to the North American birdseed industry. The economic slowdown is expected to result in a lower demand and as a result, exports are expected to decrease from 85 TMT in 2008/2009 to 80 TMT in 2009/2010.
Posted: 04 January 2010

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