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 of the scale. Consumption was projected at similarly strong levels, but inclement weather might be taking bites out of supply.

Canola and rapeseed production has steadied in recent years after experiencing a solid jump in 2022-23. The lift in canola production was on the back of prices well in excess of $1000/t, as demand lifted and supply couldn’t keep up.

As with all markets, high prices will be cured by high prices, as increased production is encouraged.  Figure 1 shows the strong lift in 2022-23 followed by a couple of steady years. The WASDE forecast for the coming year is for a small decline in production, with stocks-to-use easing back 8.9%, from last year’s 9.3%.

Continued strong canola production, along with increasing soybean supplies saw canola prices ease through the first quarter of the year. More recently, wet weather has caused issues with the rapeseed crop in Europe. The impact on production is expected to be significant, and has seen MATIF Rapeseed futures rally 17% since March.

The recent rally looks small on figure 2, but that’s because the scale goes up to $1500/t for MATIF when the war in Ukraine started.  That price seems extraordinary now.

ICE Canola Futures, based in Canada, have not rallied as strongly. The season in Canada is progressing without too many issues at the moment.  Canadian and European markets are linked, but Canada is GM, and European is not, so the oilseeds are not direct substitutes.

Australian canola markets tend to follow MATIF more closely now, and they have rallied in conjunction with MATIF values.

Local canola values are back to similar levels to pre-harvest, and in March-23 before that. Those who have held canola are finally seeing some reward, if they sell now. 

In terms of selling forward, local canola prices are still heavily discounted to MATIF, but the spread has shrunk in recent weeks (figure 3). The late break through key canola growing areas in Victoria, South Australia and Western Australia will see weaker supply this year. When things are tight, canola will usually trade within $50 of MATIF Futures, so there is still some room for upside.

What does it mean?

Despite the stronger canola prices, there is little incentive to sell at the moment.  We will get some idea of local plantings from the ABARES June crop report, but they are likely to be down due to the season.   This should see prices gain more ground on international futures.

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Key Points

  • World canola production was forecast to be steady, but issues have arisen in Europe.
  • Canola values have rallied strongly over the last 8 weeks, now back at 12 month highs.
  • The delayed break in key canola areas should see local prices gain ground on international values.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: USDA, Refinitiv, Mecardo

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