Canola prices have bounced back to their recent highs and sit at levels not seen since 2022. Global supply remains solid, with perhaps some tightness in global export markets driving the strong values.
Figure 1 shows canola prices falling recently before rallying back to the peaks seen towards the end of July. Oilseed markets have been highly volatile overall, with crude oil prices having a strong influence.
While the conflict in Ukraine is supporting wheat prices, it seems that the conflict in Iran is supporting canola, despite the strong production which is expected this year.
Figure 2 shows canola and rapeseed production is forecast to hit another record high this year for the second in a row. Demand is also increasing, to help support prices, with only minor increases in stocks and the stocks to use ratio.
Canada is in the early stages of harvest and prices remain extremely strong. Reports out of Canada outline continued strong demand from China, which is helping support prices. This is despite the USDA forecasting a record Canadian canola crop at 22.5mmt, up marginally from last year’s record.
Ukraine is an exporter of canola, and the USDA are forecasting a 1.2mmt decline in exports this year. This is a 62% decline and is likely helping support prices.
The European heatwave seems to have had a minimal impact on rapeseed production. The USDA have EU rapeseed production forecast to be steady on last year at 20.5mmt. The EU are a net importer of rapeseed and canola, and Australia’s major market for conventional canola.
We can see in figure 1 that both ICE and local canola prices have been closing the gap on Matif values. This is good news for all canola growers, but even better for those producing GM canola, which generally competes with Canadian product in export markets.
Figure 3 shows GM canola at Geelong has rallied nearly $90/t since harvest, which has largely been driven by stronger prices in Canada.
What does it mean?
With canola flowering across the country, producers will be pleased to see prices on the rise. There is some risk that when the Canadian harvest ramps up, we could see pressure on prices, however, the market is currently factoring in strong demand to soak up increased supply.
Key Points
- Canola prices have rallied again and are sitting at an 18-month high.
- Rapeseed and canola production is expected to be at record highs, but demand is rising.
- The market is expecting demand to remain strong through Canadian harvest pressure.
Click on figure to expand
Click on figure to expand
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Data sources: CME, ICE, Bloomberg, Mecardo
