Chicago, May 17 (OsterDowJones) - Total Canadian 2004/05 oilseedproduction is forecast to increase to 10.0 million metric tons from 8.9MMT in2003/04, according to information from the U.S. Department ofAgriculture'sForeign Agricultural Service web site, dated June 3 and released Friday.

OILSEED PRODUCTION OVERVIEW 2003/04

SOYBEANSSeeding and Growing ConditionsBased on Canadian Grains Commission (CGC) reports, the majority ofOntariosoybean planting was delayed until late May and early June 2003 due to wetspring conditions. It was estimated that only 75%-80% of the soybean cropwasplanted by June 18. Sporadic rainfall across much of the province in earlyJuly allowed the early-planted crops to develop well. In general moisturelevels were good, especially compared to the previous two summers of 2001and2002. However, because of the late plantings in some areas, there wasstill awide variation in maturity of the crop by mid September.

Harvest ConditionsAn early frost in September caused decreases in both crop quality andquantity. Wet cold weather in late September and early October slowed theharvest, the report said. The 2003 Ontario soybean harvest was notcompletedin some regions until late November or early December. Yields were reducedinsome areas because of the extreme heat experienced during the criticalpod-filling stage of development. The Manitoba soybean harvest began in mid-September and was estimated to be 90% completed by the middle of October.

Production and grade informationCanadian soybean production for the year 2003 increased by 2% to 2.27million tons from last year's production of 2.22 million tons, the reportsaid. In Ontario, the 805,300 hectares of harvested soybean yielded anaverageof 2.1 tons/ha for a total Ontario crop of 1.73 million tons in the 2003cropyear. Other areas of significant soybean production for 2003 includedQuebecand Manitoba with 325,000 and 149,700 tons respectively.Compared to last year, there were fewer numbers of lower grade soybeansamples from Ontario. Levels of green beans in 2003 were less severe thaninthe 2002 Ontario soybean crop. Immaturity or green beans were not an issueinthe 2003 Manitoba soybean crop. Based on the 2003 CGC survey samples, 94%ofthe Ontario and 80% of the Manitoba samples were in the top two grades.

QualityThere are two major types of soybeans grown in Canada, commonlyreferredto as oil (or "crush") beans and food beans. Oil beans are grown forproducingoil and high-protein meal. Soybean oil is used in salad oil, shorteningandmargarine products. Defatted soybean meal is used as a protein supplementinlivestock rations. Key quality factors for oil beans are oil content,proteincontent, and the fatty acid composition. Oil and protein content givequantitative estimates of the beans as a source of oil, and of thedefattedmeal as a source of protein for animal feed. The fatty acid compositionprovides information about the nutritional, physical and chemicalcharacteristics of the oil extracted from the beans. Food beans arevarietiesof soybeans that have been bred for specific qualities required in theproduction of traditional soyfoods. The quality of these beans is measuredbysuch attributes as a clear or white hilum, larger seed size, and higherprotein content. White-hilum soybeans that do not meet quality standardsforfood processing are used as oil beans or feed beans.The 2003 average Canadian oil content of 21.2% was similar to the21.2% in2002 and slightly higher than the ten-year mean of 20.8%. Individualproducersamples varied in oil content from 17.2% to 26.4%.The 2003 average protein content of 41.1% was slightly lower than the41.3% in 2002 and well below the ten-year-mean value of 42.0%. The No. 1Canada Yellow samples were slightly higher in protein, but similar in oilcontent compared to the No. 2 Canada Yellow samples.

CANOLASeeding and Growing ConditionsAccording to the CGC, a combination of rains during the 2002 harvestandnormal to above normal winter precipitation greatly improved the soilmoisturesituation in western Canada for the spring seeding season. The wetter thannormal precipitation pattern in Saskatchewan and Alberta delayed seedingprogress. Overall planting progress was 10 days to two weeks behind normalforthe Prairies.Although the crop was rated in mostly good to excellent condition inmid-June, the lack of sub soil moisture was a major concern, the report said.These concerns were well founded, as hot and dry conditions dominated theweather on the Prairies from mid-June to late August. The warmer thannormaltemperatures caused yield reductions in all crops, dropping above averageproduction potential back to average to slightly below-average in mostregions.Timely rains limited yield losses in northern growing areas ofAlberta.The warm, dry weather during the summer months was ideal for grasshoppers,which resulted in significant damage to crops throughout the Prairieregion.The environmental conditions did keep plant diseases in check, with leafandhead diseases reported at the lowest levels in a decade.

Harvest conditionsThe harvest began the first week of August on the eastern Prairies andwasunderway in all areas except northern Alberta by the middle of the month.Rainfall during August and September was well below normal, which resultedina rapid harvest pace. The majority of the crop was harvested by the firstweekof September, with most of the unfinished harvest located in northernAlbertaand Saskatchewan. Cool, rainy conditions in the northern areas slowed theharvest in the middle of September, but the return of warm, dry conditionsbythe end of the month allowed the harvest to proceed rapidly. The ManitobaandSaskatchewan canola harvest was essentially completed by Oct. 5 while theAlberta crop was estimated to be 90% harvested at that time.

Production and grade informationWestern Canadian farmers planted 4.73 million hectares of canola in2003,which is a 19% increase from the planted area in 2002. Average to aboveaverage yields in 2003 for Manitoba and Alberta resulted in a westernCanadayield of 1400 kg/ha which is higher than the 1300 kg/ha reported for 2002andabout three percent above the 10-year mean of 1364 kg/ha.With the increased harvested area, total canola production in westernCanada was up 60% in 2003 to 6.67 million tons according to estimates byStatistics Canada reported inField Crop Reporting Series No. 8, Dec. 5, 2003. The largest proportion of2003 production, 41%, was grown in Saskatchewan. Manitoba accounted for26%while Alberta and British Columbia accounted for 33%.

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Initially, there was concern for canola that was shriveled andunder-sizeddue to the extreme drought. Those regions affected by the drought weregenerally harvested first. Overall, the green seed count was consideredlowerthan the previous two crop years. In addition, there were relatively loweramounts of sprouted seed found in survey samples this year. While theproportion of canola seed in the top grades was high, the seed containedlowerthan average amounts of oil due to the extreme heat.

QualityWestern Canadian canola tested in the 2003 harvest survey is slightlybelow average in oil content but above average in protein content. Theaverageoil content of 41.8% for No. 1 Canada canola from the 2003 harvest surveyislower than both the 42.5% in 2002 and the 10-year mean of 42.9. TheAlbertaoil content of 42.7% is significantly higher than the 41.1% and 41.8% forSaskatchewan and Manitoba.Compared to 2002, mean oil contents have increased by 0.6 percentageunitsin Alberta, but decreased by 1.7 and 0.7 percentage units for SaskatchewanandManitoba respectively. The oil content of No. 1 Canada canola fromproducersin western Canada varied from 34.6% to 50.6%. The average oil contentsdecreased significantly in the lower grades of canola. The decreased oilcontents seen in the 2003 survey are a result of the extreme heat anddroughtthat affected large parts of the canola growing area.The mean oil content of canola exports from Vancouver in November 2003was41.2% on an 8.5% moisture basis, 0.7% lower than the 2002-03 mean of41.9%.The mean oil content of Thunder Bay exports in November 2003 was also41.2% onan 8.5% moisture basis. The oil content of Canadian exports in the 2003-04shipping season will likely remain near 41% on an 8.5% moisture basis.

OILSEED OUTLOOK - 2004/05For 2004-05, Agriculture and Agri-Food Canada (AAFC) citing theStatisticsCanada seeding intentions survey, conducted during late March, indicatedthatwestern Canadian farmers plan to shift area into oilseeds and specialcrops,out of wheat, coarse grains and summer fallow. In eastern Canada, theareasseeded to oilseeds and corn are expected to increase, while area forwheat,other coarse grains and special crops decreases. Total production ofgrainsand oilseeds in Canada is forecast by Agriculture and Agri-Food Canada toincrease by 2%, to 60.8 MMT, versus the 10-year average of 58.5 MMT. Trendyields are assumed for all regions except for Alberta and Saskatchewan,whereprecipitation has been below normal and subsoil moisture reserves remainlow.

SOYBEANSProduction in 2004/05 is forecast to reach a record of 3.0 milliontonsdue to record high seeded area and a return to normal yields, the reportsaid.Domestic use is projected to rise slightly while exports rise to a record1.0million tons. The average price of soybeans is forecast to fall to $350/t,I/SChatham, from $385/t expected for 2003-04, due to higher soybeanproduction inthe U.S. and South America.

CANOLAFor 2004-05, production is forecast to increase by 5% to 7.0 milliontons,due to higher seeded area. Supplies are forecast to rise slightly,supportinghigher exports. Exports to China and Mexico are forecast to increase in2004.Carry-out stocks are expected to remain stable. The price of canola isforecast to decrease to a midpoint of $380/t, I/S VC, from $395/t in2003-04,due to higher world oilseed production.

SUNFLOWERSEEDSAccording to AAFC, in the 2004/05 marketing year, production andsupplyare forecast to decrease, due to a 26% decrease in seeded area harvested.Canadian exports and domestic use are expected to remain stable from the2003/04 year, causing carry-out stocks to decrease to a low level. Theaverageprice, over both types and all grades, is forecast to increase due to thelower supply.

---OsterDowJonesnwyckoff@osterdowjones.comCopyright 2004 OsterDowJones Commodity News (ODJ). All rights reserved.

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