Category: Canola Oil

Diminished crop prospects from poor weather, especially in Canada, have turned Rapeseed and Canola markets on their heads, with prices at all time highs.

Popular with many cooks around the world due to its ability to be heated to higher temperatures than some other cooking oils, Canola oil is derived from Canola, or Rapeseed. And Rapeseed markets are hotter than Canola oil’s four hundred degree smoke point right now. In fact, the closing price of spot Canola futures on the Winnipeg Commodity Exchange today set an all time daily, weekly, and monthly closing high price at $908.70 Canadian Dollars per metric ton. For perspective, one year ago, on May 1, 2020 spot Canola futures settled at $463.20.

Sub-optimal weather is threatening the crop in Canada and Ukraine, the world’s top two Canola exporters. In parts of Canada the weather is unusually dry, so much so that Canada, also the globe’s top producer of Canola, is reported to have committed to actually importing Canola from Ukraine. This extremely unusual event came about because Canada has sold virtually all of its available Canola exports, in large part to China, the world’s number two producer and number one Canola consumer. While Canada is shipping its Canola west to China, Ukraine is now shipping Canola west to Canada. This makes sense given the vastness of Canada’s landmass; its more economical to ship Ukrainian Canola westward across the Atlantic into eastern Canada than to source it from the more central and western regions of Canada where most Canadian Rapeseed is grown. This is a truly classic example of free trade at work.

In Ukraine, harsh winter weather has put markets on edge as farmers wait to see how much damage may have been done to the winter Canola crop, which accounts for the vast majority of Ukraine production of the valuable oilseed.

All of this weather based uncertainty has the world’s two top importers of Canola, namely the EU (as a block) and China, along with everyone else on the planet, paying up to secure much needed supplies. Australia, the number three global exporter, isn’t experiencing the weather problems of its two main exporting competitors; Australian Canola farmers will undoubtedly reap a welcome windfall this year in the Rapeseed markets.

Unusually high prices for many of the world’s top oilseeds and cooking oils have become the norm of late, but Canola/Rapeseed stands out right now mainly because of the drought in Canada and voracious Chinese buying – probably linked to China’s crop production issues last year, which may have affected China’s Rapeseed crop. Reliable statistics and information regarding the 2020 problems across China’s largest agricultural regions may never fully come to light, but it’s a good bet that as the world’s number three Canola producer China’s production and available supplies may have been drawn down, perhaps substantially.

All of this means that the price of Canola, while likely overheated and due for a price pullback at some point in the not too distant future, may stay at elevated levels relative to historical norms for quite some time.

Article was written by Sal Gilbertie.

CANOLA prices have continued to soar over the past week, with spot prices on the benchmark French MATIF exchange rising an incredible $55 a tonne overnight last week and Australian old crop values poking through the $700/t mark.

A number of factors had contributed to the rise, which is also presenting Australian growers with the opportunity to lock in high new crop values should they have the risk appetite.

Andrew Whitelaw, Thomas Elder Markets, said supply and demand dynamics in Canada, the world’s largest canola exporter, were changing.

“There has been a lot of extra crushing capacity installed in Canada in recent years,” Mr Whitelaw said.

It has led to a rare situation where Canada was required to import Ukrainian canola to meet domestic demand.

“It could be likened to what happened in Australia where Manildra imported wheat during the drought, it is something that very rarely happens,” Mr Whitelaw said.

The lack of supply, combined with ongoing concerns about the upcoming crop in the world’s key production zones of Canada and the European Union has contributed to the massive rise in values during the first third of 2021.

 There has been a massive spike in both Canadian (ICE) and French (MATIF) canola prices. Source: Thomas Elder Markets.

Mr Whitelaw said there were a range of other factors also keeping prices bubbling along.

“There is uncertainty about Chinese demand, which remains very strong for both soybeans and canola, while more broadly there has also been a big rally in grain markets over the past week, all of the factors are playing a role in keeping prices high,” he said.

Nick Goddard, Australia Oilseeds Federation executive officer, said it had led to a positive feeling throughout the Australian industry.

“It’s a fantastic time for the industry and people are buoyant,” he said.

“While we don’t expect these type of values to remain throughout the season there is the expectation we’ll still be looking at good prices as we get closer to harvest, especially if the current issues in the northern hemisphere persist.”

He said that the strong demand from the European Union for canola for biodiesel, combined with declining production in that region, which has been attributed to pesticide bans, including effective neo-nicotinoid insecticides, contributed to the unprecedented demand for Australian canola.

Andrew Suverijn, Nuseed national sales manager and customer lead, said feedback was that growers that had planted into moisture, particularly in WA, were comfortable in locking in at least a small proportion of their expected production at current values.

“It’s a great number and they’re willing to lock a small parcel in.”

Mr Goddard said the economics of canola production changed markedly with prices at these levels.

“Where growers may have once thought it was risky to grow canola if they needed 1.2 tonnes a hectare to break even, based on the former benchmark price of $400/t, now they probably only need 0.6-0.7t/ha so that changes the thinking.”

Tobin Gorey, Commonwealth Bank commodity analyst, said broader grain markets overall had also seen a big lift in the past week.

He said the concerns regarding weather extended into the wheat market, with moisture stressed US hard red winter wheat crops suffering cold conditions, followed by an unseasonably hot spell, both which have potential to damage yields.

He also said Russia has hit its export quota for wheat quicker than expected, which had also been supportive of prices.

Article was written by Gregor Heard.

PARIS/WINNIPEG/SHANGHAI (Reuters) – Rapeseed prices are surging to record highs as traders scour the world for supplies of the oil-rich crop, illustrating growing strain across oilseed markets exerted by booming Chinese demand.

The scarcity of rapeseed, the yellow-flowered crop processed to make oil for cooking, biodiesel fuel and protein meal for livestock, has coincided with reduced supplies of soybeans, sunflower and palm oil.

As a result, oilseeds are a major factor in the United Nations’ global food commodity price index reaching a 6-1/2 year high, prompting some individual governments such as Russia to impose measures aimed at curbing grain exports.

Poor harvests in Canada and Europe have also tightened supplies with stocks held by major exporters seen falling sharply to an eight-year low by the end of the current 2020/21 season, according to the International Grains Council.

Rapeseed prices in Europe are booming, with Euronext futures reaching a record high of 528.75 euros ($629.05) a tonne on Monday, up around 40% since the start of the season on July 1, 2020.

Available supplies of canola, a variety of rapeseed, in top exporter Canada have fallen particularly sharply, fuelling a surge in benchmark Canadian futures to record highs last month.

“There’s just a massive lack of vegoil supply,” said Uros Vukov, a commodities broker at StoneX in Montreal.

In China, low inventories, record prices for rapeseed oil futures on the Zhengzhou Commodity Exchange and political tensions with Canada have created an opportunity for European exporters.

That would mark a further acceleration in EU rapeseed oil shipments to China that are already up around 40% so far this season at about 130,000 tonnes.

“Boosted by the rise of soyoil and palm oil (prices), and the fact that domestic inventories of oils and fats are also low, rapeseed oil prices are expected to continue maintaining their strength,” said Wang Yujie, edible oils analyst at Orient Futures.

Chinese demand has contributed to a ramp-up in EU rapeseed crushing, which hit record volumes in January according to vegetable oil industry group Fediol.

Graphic: ICE/Euronext canola/rapeseed futures hit record high –

AUSTRALIAN ARMADA

For merchants in Europe, soaring vegetable oil prices, with rapeseed oil prices in Rotterdam at 10-year highs, have made it profitable to sell oil.

“Seed prices are high but so are oil prices so that is an incentive to crush,” a European trader said.

“It’s going to be tight covering consumption with supply that is low. The question is now about Australian supplies arriving.”

A bumper Australian rapeseed harvest is expected to provide an influx of imports for Europe in the coming months, as supplies from Canada and Ukraine dry up.

Australia could ship over 2 million tonnes to the EU over January-July, contributing to record projected EU imports in 2020/21, analyst firm Oil World forecasts.

Developments in other oilseeds might also ease tensions in rapeseed.

The arrival of a weather-delayed South American soybean harvest, an expected increase in spring planting of oilseeds in North America and the Black Sea region, and improved palm oil production could curb interest in scarce rapeseed.

In China, a widening price premium over other edible oils should limit rapeseed oil consumption, Wang said, adding relations with Canada, which soured over the arrest of a Huawei executive, will continue to influence rapeseed imports.

Like in other oilseed markets, however, rapeseed prices are not expected to fall back dramatically as supply issues spill over into next season.

Canadian farmers are seen expanding rapeseed plantings. But a potentially bigger 2021 crop will only come after stockpiles have shrunk to an expected eight-year low at the end of this season, according to an official estimate.

A drought-hit rapeseed sowing campaign in Ukraine and the EU has clouded production prospects in Europe, and new-crop EU prices are at their highest in years well above 400 euros.

“Upward price potential is still very much there as the road to the next harvest remains long,” consultancy Agritel said.

Reporting by Gus Trompiz and Forrest Crellin in Paris, Rod Nickel in Winnipeg, Manitoba, Emily Chow in Shanghai, Michael Hogan in Hamburg, Pavel Polityuk in Kyiv, Polina Devitt in Moscow and Nigel Hunt in London; Editing by Veronica Brown and David Evans