The Rural Voice, 1990-09, Page 18AGRICULTURAL
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R.R. 3, Ripley, Ontario
519-395-5757
14 THE RURAL VOICE
"IF ONLY THE PRICES
WERE BETTER ..."
Robert Mercer is editor of the
Broadwater Market Letter, a weekly
commodity and policy advisory letter
from Markham, Ontario, L3P 3A9.
Ontario doesn't grow much canola
compared to the millions of acres in
the prairies, but our 50,000 acres of
yellow are an alternative crop with po-
tential. The vegetable oil market got
a boost recently, when McDonald's,
Wendy's, and Burger King all said
they would switch from animal fats to
vegetable oils to fry potato products.
But all is not well in the canola
industry. Crush margins are a disas-
ter, and in the West plants have been
losing money and closing down, either
permanently or on a rotating basis.
At present, a premium is being
paid for seed on the export market, but
not the oil. Oil faces stiff competition
from subsidized sales by the EEC.
This year, the prairies will over-
shadow Ontario in production with
6.35 million acres. The early forecasts
indicate that yield will be an average
of 23 bu/ac (Alberta Agriculture), 24.5
bu/ac (United Grain Growers) or 24.5
bu/ac (Pioneer Grain). Production
will therefore be from 3.3 to 3.5
million tonnes. With a reasonable
carryover of stocks from the old crop
year, total canola supplies in Canada
will be about 4.0 million tonnes. This
could be the lowest since 1985-86.
The sad tale this year, already
showing up in price, is that exports
will likely hold steady but domestic
use will drop again. The Ontario basis
has been reasonably steady up to
April, with the Hamilton basis quoted
at S25 under the September futures.
The futures, however, have been as
weak as the soybean complex.
Given the excellent growing con-
ditions in the prairies so far, the yield
predicted could go even higher. Here
arc the yields over the last 10 years:
1980 21.3 bu/ac 1985 22.3 bu/ac
1981 23.5 1986 25.6
1982 22.3 1987 25.7
1983 19.8 1988 20.9
1984 19.7 1989 18.2
There is still a good chance that
Prairie producers will get record yields
if there is no frost at harvest. But now
it looks as if supplies will remain tight
across the West, though canola crush
bid will be weak. Current usage of the
crush capacity in the prairies is only
60 per cent. This is not profitable for
the crusher — or for the canola seed
supplier. Alberta Agriculture esti-
mates crusher bids there to be about
$270 to $300 for new crop. That is
an Alberta basis of $45 under the
expected range in Winnipeg futures.
The excellent yields in the West
and the plight of the crushers will do
little to boost Ontario prices, which
now rest on the ability of other mar-
kets to influence the price direction of
vegetable oil. If you want to get the
Ontario price, use the Canola Associ-
ation phone-in tape: 519-347-2781.
Alongside the potential for a large
canola yield are similar conditions that
give a greatly improved total size of
the prairie grain harvest. Excellent
moisture conditions across the prairies
have improved yield prospects.
A large prairie crop could pressure
feed grain prices in Ontario. Western
barley, oats, and feed wheat will be
abundant. The crop reports issued
weekly by the pools and the prairie
provinces were optimistic about con-
ditions up to the first week of August.
In Saskatchewan, for instance, the
pool rates crop conditions "well above
average." In Alberta, the pool says
conditions generally "are very good,
with above average yields predicted."
There are problems in the Peace River
area as well as in south Saskatchewan.
The West will have a good year in
yields, but price will be the offsetting
factor. This is much the same as in
Ontario, where the corn looks great,
wheat excellent, and soybeans above
average. As always, the cry is "if only
the prices were better!"0