Canola pricing has continued its rollercoaster price trend in recent weeks, as international values fluctuate on political announcements. Wheat has been much more benign, although the weather is seeing some price spreads widening.
It’s safe to say that since the US election canola volatility has ramped
up. First, the threat of tariffs on used
cooking oil sent canola and rapeseed futures higher. Next, there was the spectre of tariffs on
Canadian exports to the US. Canada
exports a lot of canola oil to the US, so prices went down.
Late last week a report suggesting tighter supply sent canola into
positive mode, pushing prices higher again.
Matif Rapeseed is almost back to the peaks of a fortnight ago, while ICE
Canola is lagging a little.
The local spread between conventional and GM canola has widened further, following
their respective ‘futures’ cousins. Canola
is back near $800 on a port basis, while CANG remains under $700/t. An extreme spread in historical terms.
Canola’s basis to international values is shown in Figure 2. Locally canola hasn’t rallied quite as
strongly as Matif in the last week. Increased
selling from growers relieved to have the market back up could be the
reason. This might point towards some
post-harvest upside.
Chicago Soft Red Wheat (SRW) has remained relatively steady over the past
fortnight. As outlined in Friday’s
Market Comment, future tight supply is wrestling with current satisfactory
supplies, and the market is tracking sideways.
The weather here has seen the potential for downgrades in quality heightening. Figure 3 shows southern APW market markets
have ticked upwards over the last fortnight.
Feed markets have remained steady.
The APW/SFW spread at Geelong has widened from $20 to $35 in the last
fortnight. This is nowhere near the
$50-100 milling/feed spreads we have seen in other wet years, with feed demand
still relatively strong thanks to an ordinary season in the south.
What does it mean?
Harvest should ramp up again over the coming 10 days, with a majority of the rest of the crop likely to hit warehouses. There might be a January bump on the back of weak grower selling and shipping deadlines, but those looking for significant upside remain subject to international markets.
Key Points
- Volatility has continued to impact canola markets internationally and locally.
- A weaker canola spread might point towards some post-harvest upside.
- Wheat markets remain relatively benign.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Bloomberg, Mecardo
