Crude oil is sliding back to where it started, but canola is finding support. Oilseeds appear to be running their own race, finding support on production concerns.
Commentary around the price of crude oil has slowed to a trickle. Headlines about prices falling back to where they were don’t get nearly as many clicks. Spare a thought for all those who cancelled their winter road trips, only to find diesel now back where it was. And the growers who paid $3 per litre to put the crop in.
Figure 1 shows Brent Crude Futures are back at $73/barrel which is well and truly in the normal range of the last three years. Any news of instability regarding the conflict in the middle east over the weekend didn’t move the market, which seems to think the trade is returning to normal.
Just as oilseed and canola prices only crept higher following the jump in crude, it hasn’t really reacted to the fall either. Soybean futures fell heavily in early June but have tracked sideways since. Canola prices have been largely steady.
Figure 2 shows canola prices have remained steady over June, resisting both the decline in soybeans and the fall in crude. The heatwave in Europe is no doubt affecting rapeseed crops, but there have been no official updates on yield impacts yet. The USDA are scheduled to release the WASDE on July 11, and this might provide some clarity.
Locally canola prices have also remained steady, despite improving prospects as rain front swept through key canola growing areas on both the east and west coast.
Growers are usually reluctant to lock in prices at this time of year, with plenty of production risk to be navigated between now and getting the crop in the silo.
The northern hemisphere oilseed harvest is month away yet, but US soybeans are in good condition, with only 6% poor or very poor, which is similar to last year. Harvest pressure generally impacts international oilseed markets in our spring.
What does it mean?
Given the global instability, canola and rapeseed prices have been remarkably steady. Local canola prices won’t be able to resist northern hemisphere harvest pressure, but there is plenty of potential production risk to get past for that comes on.
Key Points
- Crude oil prices have fallen further, with oilseed markets resisting the fall.
- US soybean crops are looking good, but the heatwave in Europe may impact rapeseed.
- Northern hemisphere harvest pressure could impact canola prices in spring.
Click on figure to expand
Click on figure to expand
Data sources: CME, ICE, Matif, Bloomberg, Mecardo
