While soybeans have been a drag on oilseeds in general this year, with a very strong crop expected in the US, canola seems to be charting its own path in some respects. We delved into the World Agricultural Supply and Demand Estimates (WASDE) report to see why.
Canola and rapeseed production leapt higher in 2022-23 in response to the
extreme prices seen on the back of the Russia-Ukraine war, and a weak
production year in Canada. Figure 1
shows that the lift in production helped build stocks from the lows of 2021-22,
back to a more comfortable stocks-to-use ratio of 12%.
While 12% was an improvement, it was still well behind some of the peaks
seen through the late 2010s. We also see
canola and rapeseed consumption has risen strongly, which puts pressure on
supplies when there is a bad year.
Figure 2 shows where canola and rapeseed are produced. It’s no surprise to see Canada and the
European Union as the largest producers.
Canada is expected to have a small 4% increase in production this year,
but this will be more than offset by a 13% decline in the EU. Weakening EU production is largely
responsible for a 2% decline in global production.
What was a little surprising was the amount of Canola and Rapeseed ‘other’
countries produce. Similar to China,
Russia and the EU, very little of the ‘other’ countries canola is exported.
China and the EU are large importers of canola, along with producing
plenty of their own. When production declines
in those countries it puts more pressure on countries with exportable
surpluses.
Figure 3 shows the major exporters of canola and rapeseed. Despite producing just over 6% of global
canola and rapeseed this year, it is expected to provide 27% of global
exports. This is not far behind Canada,
which accounts for 42%, and now ahead of Ukraine, which used to hold second
spot.
The dry conditions and frosts that have been impacting canola crops here
might be helping push canola prices higher.
What does it mean?
Both ICE and Matif futures finished last week higher, as the market grappled with potential supply tightening. Over the coming month, we should get an idea of how crops are yielding, and this could see some impact on international and local prices if they are much weaker than expected.
Have any questions or comments?
Key Points
- Canola markets have been strong in the face of increasing global oilseed supply forecasts.
- Strong Canadian production this year has been offset by weaker EU crops.
- Both local and international prices could swing on Australian production due to large, expected exports.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: USDA, Bloomberg, Nutrien, Mecardo