Grain field on a blue sky day

Canola prices are strong historically, but also very volatile. We had a request this week to assess the short to medium-term outlook for canola. Like all commodities, it’s a pretty murky situation, but we can bring together the fundamentals and see how it looks.

Local canola prices are driven by several factors.  Australia usually produces an exportable surplus, and the base price of canola is set by the international market.  MATIF (Marché à Terme International de France) Rapeseed Futures largely drives our values.

MATIF Rapeseed is part of the wider oilseed complex, which is driven by the supply and demand of soybeans and palm oil.  Oilseeds can be impacted by oil and gas prices through biodiesel production. Locally canola prices are set by domestic supply and export demand.  There is some canola crushed here, but most of it is exported.  Australian canola prices fluctuate around MATIF futures.

Figure 1 shows MATIF Rapeseed Futures and Geelong Canola since 2019.  We used to think canola was volatile, but in the last two and a half years, this volatility has gone to a new level.  The good news is MATIF, and local canola seems to have found a level that buyer and sellers are comfortable with, and price fluctuations have lessened this year.

MATIF and Australian canola are still priced well above what used to be thought of as a very strong price around $600/t.  This would suggest there is some scope for downside.

The futures market is identifying downside, but not until the northern hemisphere harvest of 2024.  Current issues with South American soybeans, along with the war in Ukraine are expected to limit oilseed supplies and prop up prices for the coming year before supplies improve in 2024.

New crop prices here are currently pitched at the same level as the old crop.  A discount of $100/t is too large in a more normal production year, so there could be some upside in price if MATIF holds.

What does it mean?

From a charting and a fundamental perspective international canola prices should drift lower over the coming year.  Obviously, this is dependent on a good year of crop production in the northern hemisphere, which while no guarantee, is looking more likely.

Locally prices have some upside relative to MATIF, but it is limited to $30-50/t.  All things being equal Australian canola should be steady to lower over the coming six months, but all things are never equal.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • Canola prices remain well above pre-2021 levels.
  • Futures markets are forecasting a fall in prices, but not until 2024.
  • International canola is likely to drift lower, but locally there is some basis upside potential.

Click on figure to expand

Click on figure to expand

Data sources: MATIF, Profarmer, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Bears in the new crop

This week has been all about the impending Northern Hemisphere harvest hitting the pipelines. Despite a raft of supportive news, the noise was drowned out

Read More »
Grains & Oilseeds

Canola wild ride continues

In the World Agricultural Supply and Demand Estimates (WASDE) released last month global canola and rapeseed production was forecast to remain at the upper end

Read More »
Grains & Oilseeds

India a demand dark horse

This week has seen the wheat market jump on cuts to Russian production, only to give most of the gains back as rains appeared in

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.