Canada turns to Ukrainian rapeseed on tight supply

A large multinational grains and oilseeds trading firm booked at least two cargoes of Ukrainian rapeseed for its Canadian processing plant for delivery in August amid tightening supply in Canada, market participants told Argus.

The unusual shipment is said to be the first rapeseed delivery from Ukraine to Canada, which is the largest producer and exporter of canola — a variety of rapeseed — in the world.

The Canadian canola supply-demand balance has tightened this year as a result of lower production and higher exports. The country's ending canola stocks in the 2020-21 marketing year (August-July) is forecast at 700,000t, considerably below 2.4mn t a year earlier, the US Department of Agriculture's Foreign Agricultural Service (FAS USDA) data show.

Tighter supply has pushed Canadian canola prices in the local market to $730/t this season, up by 70pc year on year.

Canadian canola production in the 2021-22 marketing year is anticipated to rise by 20mn t, up by 7pc on the year because of rising planted areas. But the 2021-22 sowing campaign, due to start at the end of this month, is expected to take place amid persisting dry weather conditions, which could weigh on output.

Forward prices for the new Ukrainian rapeseed crop are seen around $570-580/t fob, market participants said. This is $150-160/t cheaper than current canola price levels in the Canadian domestic market. 
And expectations of low canola stocks at the start of next season in August could incentivise further Canadian purchases of Ukrainian rapeseed. 
Ukraine is expected to produce 2.7mn t of rapeseed in the 2021-22 marketing year, FAS USDA data show. The country, which sells about 90pc of its output to EU countries, is forecast to export 2.3mn t of rapeseed next year. 
Ukrainian rapeseed oil exports so far in 2020-21 have reached 100,000t, with China buying nearly half of the volumes. At the same time, Ukrainian rapeseed meal exports have totalled 130,000t. Israel, which has bought about 36,000t of the product, is the largest buyer of Ukrainian rapeseed meal, while China has not purchased any rapeseed meal from Ukraine so far this season.

By Alexey Yeromin