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Canola Crop Forecast to Grow on Pricing Strength

Canadian farmers will likely harvest more canola this year to cash in on high prices, but flooding is possible in the top-growing province of Saskatchewan and will be a key factor, the head of the main canola industry group said on Tuesday.

Canola, soybean and rapeseed prices are trading around two- to three-year highs, giving farmers ample reason to plant the oilseeds, although cereals have spiked too, said JoAnne Buth, president of the Canola Council of Canada.

"Clearly in Canada it will be up," she said in an interview. "Generally, growers are going to respond and there will be increased production."

Much of Saskatchewan was pockmarked with potholes of rain before winter and heavy snowfall has since added to flood potential. But Buth notes early predictions about growing conditions have missed the mark in past years.

"I just think it's too early to tell" how flooding will affect planting, Buth said.

Canada is the world's third-biggest grower of canola and the top exporter.

The flood risk to planting comes as Canadian crushers are on pace to smash the high annual volume record due to recent expansions. Bunge Ltd. is also adding processing capacity by 2012.

All that means canola demand will be rationed between domestic crushing and seed exports, Buth said.

Oilseed prices have risen on strong global demand and weather problems affecting crops, but they may not be as vulnerable as wheat to further spikes based on any new crop concerns that could emerge, Buth said.

Production of palm oil, a key source of vegetable oil, increases steadily year over year, keeping oilseed supplies in line with growing demand, she said.

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