Will the Canola decline continue in 2024-25?


With canola prices in decline for the past two harvests, and planting preparations beginning, many growers will be wondering what is in store for canola. Forecasting harvest prices at this time of year is fraught with danger, but we can look at supply fundamentals and forecasts to get an idea of direction.

Canola is part of the global oilseed complex. While canola will at times move independently of other oilseeds, substitution in various markets will always bring it back in line with soybeans, one of the major players in the oilseeds.

Figure 1 shows United States Department of Agriculture (USDA) global oilseed production data over the last 15 years. In 2023-24 a new record production level is expected, with 659 million metric tonnes produced. The growth in oilseed production has been extraordinarily strong in recent years. 

Year on year there were 3% more oilseeds produced in 2023-24, while the growth in the last 10 years equates to 43%.

Of the 659mmt of oilseeds produced, last year 398mmt were soybeans, equating to 60% of total supply. The US produced 28.5% of world soybeans, but South America are the major exporters.

The USDA has released projections for US soybean production for 2024-25 and they are looking at a record crop.  Figure 2 shows the USDA expects soybean production to breach 120mmt for the fourth time, hitting 122.6mmt, and outstripping the previous record by 1.7%.

Increasing supply is generally negative for prices, and we’ve seen what has happened to soybean and canola values over the past 12 months as last year’s crops have now rolled into expected increases in production.

Futures markets take supply and demand into account, and spit out a price.  Figure 3 shows the futures curves for US soybeans and French rapeseed. The futures curves are relatively flat, at levels which are close to three year lows.

The futures markets fit with the level of US soybean production, in terms of price level relative to supply levels.  There will be a premium built into futures prices to account for the multitude of risk factors to a crop which hasn’t been sown yet.  As such, if production forecasts come to fruition, prices could be lower.

What does it mean?

Growers looking for a budget price on canola are likely to use the current price, and the futures markets would suggest this is a reasonable estimate.  The local price relative to futures is a little weak at the moment, so some upside could come from there with tighter supplies this year. 

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) conference this week might shed a little more light on local production estimates, which will influence how our prices relate to world levels.

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Key Points

  • Global oilseed production has been increasing in recent years.
  • US soybean production is forecast to hit a record in 2024-25.
  • Canola prices have eased with soybeans, with prices expected to remain flat.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: ABS, Refinitiv, USDA, Mecardo

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