It was back in October when canola charts started to look like a rollercoaster, and it has not let down the thrill seekers. The latest instalment has seen a very strong upswing in canola futures values, with some response from local markets still to come.
It’s becoming increasingly difficult to keep up with movements in markets, with tariffs and trade barriers having speculators jumping on or off commodities on a whim. Figure 1, shows Matif Rapeseed and ICE Canola have both had their biggest upswing of the season in the last three weeks.
The strong increase in both major futures contracts looks to come back to tariff talk. When China imposed tariffs on Canadian canola oil and meal prices took a tumble, and it was around the same time the US hit Canada with broad 25% tariffs.
The US has subsequently scrapped tariffs on Canadian canola, which has seen more than 10% added to canola values in a week. There might have also been some weather and supply issues providing support, but market access to the US market is deemed very important.
Matif price has breached $900/t in our terms. The Matif rally is largely on the back of local price increases, with the weakening Aussie dollar late last week adding some cream. Matif price gained ground on the back of the Canadian rally, and there was likely some assistance from a potential tariff-induced increase in the price of soybeans and its products from the US.
If the EU responds to US tariffs with its own, the price of soybeans and its products will increase, making locally produced oilseeds more expensive. Australian producers will be hoping this flows through to canola being exported from local ports.
Local GM canola prices have surged, mirroring the rally on ICE, while conventional canola prices have yet to gain momentum. Figure 1 shows there is plenty of potential for local canola to jump higher, but traders might be waiting to see what’s next on the roller coaster before pushing local prices to what would likely be new seasonal highs.
What does it mean?
Rising international canola prices are boosting local values, signalling a positive outlook for growers. With limited old-season canola stocks remaining, growers could consider swaps to lock in new-season prices and capitalize on potential local price gains Or riding the international price lower if the canola coaster continues.
Key Points
- International canola prices have been on the rise due to positive trade and tariff news.
- Australian GM canola values have risen, but conventional is yet to move too far.
- It is a good time to look at using futures or swaps to protect against price downside for new crops.
Click on figure to expand
Click on figure to expand
Data sources: MLA, Mecardo, Bloomberg
