Canola producers who are windrowing or harvesting at the moment are getting a pleasant lift in values even as deliveries roll in. The improving market is being driven by international factors, with local prices responding in kind.
Traditionally we expect canola prices to ease at this time of year as
harvest deliveries ramp up. Canola is
often the first crop to come off, and it can be sold early to ease cashflow
issues. When widespread the cashing of
canola crops can cause prices to ease, even if international values are steady
or higher.
This October we’ve seen different dynamics. Canola prices have been climbing as harvest
begins. Much of the lift in canola
prices has been due to international influences. Figure 1 shows both Matif Rapeseed Futures
and ICE Canola Futures have been on the rise over the last month.
Matif Futures are now at an 18-month high. Tightening supply in Europe, along with strong
global vegetable oil and oilseed markets is driving rapeseed and canola
values. Chinese demand for both soybeans
from the US, and canola from Canada is strong and is helping support oilseeds
in general.
Some uncertainty surrounding the Australian canola crop is likely contributing
to the support of values. Global focus
is currently on the US election, although we likely won’t know what sort of
tariff impacts might be for a while yet.
On the production front, South American soybeans will be in the
spotlight. Talk about La Nina has
slowed, but if it eventuates it usually isn’t good for South American crops.
In the last month, we’ve seen Matif and ICE futures rally over $70/t in
our terms. Normally a rally at this time
of year wouldn’t fully translate to local prices, but we’ve seen the full value
come through on both the east and west coast canola markets.
Geelong canola finished last week at $790-800/t, a two-year high, and $150/t
better than this time last year. In the
west canola is priced at $860-865/t at Kwinana, up $190/t on last year and again
at a two-year high.
What does it mean?
Figures 2 and 3 show Kwinana and Geelong basis to Matif and ICE Futures. Both are near the top of the 18-month range to Matif and higher versus ICE. Our GM canola prices are weaker, and more in line with ICE Futures.
Strong canola prices, both in absolute terms, and relative to international futures values, are a good sell signal for those delivering canola. If warehousing, there should be an expectation that international markets or basis will improve.
Key Points
- Canola prices are rallying at a time of year when they normally ease.
- Stronger international values and local crop uncertainty are helping support prices.
- It’s a good time to sell canola unless expecting more upside from international markets.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: USDA, Bloomberg, Nutrien, Mecardo
