Canada: canola prices expected to stay high

New crop canola prices are more likely to head up than down, says a trader of the commodity.

PI Financial broker Ken Ball says new crop canola is comfortably valued at $840 per tonne right now.

“It’s certainly not likely to come crashing down even with a good crop in Canada, the European Union and the Black Sea,” he said.

Ball believes November canola futures could quickly return to old crop values of $1,000 per tonne if Canada’s 2022 crop got off to a rocky start.

“It wouldn’t take all that much,” he said.

“We rarely get a 100 percent smooth crop year underway in canola. There’s always problems with too dry, too wet, too cold, too hot somewhere.”

The pressure is on Canada to produce a solid crop in the range of 19 to 21 million tonnes after last year’s disastrous harvest of 14.5 million tonnes.

There could be some supply relief coming from overseas.

Strategie Grains estimates farmers in the European Union planted 14 million acres of rapeseed, an eight percent increase over last year.

It is forecasting 18.19 million tonnes of production, a seven percent increase. That would be the biggest EU crop since 2018-19.

UkrAgroConsult is forecasting a similar rebound in Ukraine with a record 3.3 million tonnes of production, an eight percent increase over last year’s output.

Winter crop conditions are favourable in the EU and the Black Sea regions, according to Global Agricultural Monitoring’s latest crop condition map.

“This is on top of the very large Australian production,” said Ball.

Australia has an extra one to 1.5 million tonnes to export this winter.

“We are nibbling away at the impact of the Canadian deficit in the world marketplace,” he said.

However, the world still needs a big rebound in Canadian production in 2022 or it will be another year of rationing demand through high prices.

Ball thinks the market went too far last year with old crop canola overpriced by $50 to $100 per tonne.

“That’s the nature of a market like this,” he said.

“It’s always going to overshoot or overdo it.”

He noted that canola oil and meal values have been on a tear since Christmas, but seed values have remained relatively static by comparison because they were already overvalued.

Vegetable oil prices are being propped up in part by Indonesia’s announcement of a 20 percent mandatory domestic sales requirement for all palm producers to temper hot cooking oil prices in that country.

It’s creating a de facto limit on palm oil shipments from the world’s leading exporter of the commodity.

There is also a shortage of canola oil as Canadian crushers struggle to find supplies.

Ball thinks $840 per tonne canola is easily justified with today’s handsome crush margins and with soybean oil selling for US$0.62 a pound and soybean meal at $395 per tonne.

Agriculture Canada expects Canadian farmers to plant 21.7 million acres of canola this spring, a three percent decline from last year. By contrast, some analysts are forecasting a three to seven percent increase in plantings.

Ball doesn’t know what to think. At first his clients seemed to be leaning more toward planting cereals, but wheat prices have since backed off.

He thinks growers may be holding out for new crop canola prices in the $1,000 per tonne range because they became accustomed to those lofty levels in 2021.

The Western Producer

Tags: canola oil, rapeseed, crop, futures, canola meal, UkrAgroConsult, canola, prices, Canada