You can’t turn on the TV without seeing the latest developments in conflicts in the Middle East. The latest threat to Iranian oil production has given oil prices a boost, which is flowing through to oilseed values here and internationally.
The oil price has gained some ground, up $10/barrel or 14% since Iran launched
missiles at Israel last week. However, it
is interesting to note that oil is still around $15 of the highs of this time
last year, when war first broke out between Israel and Hamas.
Oil is a massive commodity, and one many people are interested in, and as
such it’s not hard to find some commentary around price movements. The reason oil prices haven’t moved more
sharply is because OPEC has more than enough spare capacity to supply markets
if Iranian oil flows slow or stop.
Those who remember their economic history will know that OPEC runs a
cartel, which limits the supply of oil to keep prices up.
Oilseed values tend to follow crude oil prices, with biodiesel making the
link stronger in recent years. ICE
Canola and Matif Rapeseed prices have both rallied with crude oil. The ICE move has been stronger, gaining just
over $75/t since it reached a low three weeks ago. That was when China announced a dumping
investigation, hence our market didn’t fall with it.
Matif Rapeseed has also rallied, but it’s been more benign. Early this week Matif was a touch under
$800/t, close to an 18-month high. Local
prices are following Matif more closely and sit at a $65 discount on the East
Coast.
The frost issues from a fortnight ago haven’t really seen our price rally
closer to Matif, an indication that the local traders are still comfortable
with supply, and growers are still selling.
What does it mean?
It’s about this time of year when growers start looking at pricing canola, as it’s often the first crop off, and the one that’s sold for cash flow. If pricing is left until harvest this can result in selling into an underpriced market, thanks to harvest pressure.
Current local values look reasonable relative to international values, and the lift is encouraging some sellers. If international prices stay strong, we might see further local value appreciation in the short term, but it’s a big ‘if’ in a volatile market.
Have any questions or comments?
Key Points
- Crude oil prices have rallied, but reports suggest supply is really threatened.
- Oilseed prices have followed crude oil higher, lifting futures and local prices.
- Price rises are good timing for sellers looking to lock in harvest values.
Click on figure to expand
Click on figure to expand
Data sources: Bloomberg, Mecardo