Canola prices for the coming season have been volatile, with daily price movements of $10-$20 per tonne common.
The price for 24/25 non-GM canola was $710/t on Tuesday. September was the last time prices were in the 700s. GM canola is still priced at a $30-$40/t discount to non-GM canola.
Basis for new crop canola has lifted by about (e)15/t against Matif November 2024 futures contract during April.
Autumn conditions through much of the wheat belt in WA and SA is likely to see canola seeding progress, however the anticipated area sown to canola could drop if the BOM forecast for a drier than average May eventuates. The dry conditions are keeping grower forward selling on the sidelines and hence the firming in basis.
The rally in canola prices and the volatility are reflective of the oilseed market globally. Biofuel accounts for over 20 per cent of global oilseed consumption and geopolitical tensions in the Midde East have seen the price of crude oil rally strongly which has lifted the oilseed complex. Supporting crude oil prices has been a resilient US economy which is seen as supporting the demand for energy.
The Brazilian soybean harvest is nearing completion with about 85pc harvested. A devaluation of the Brazilian Real (dollar) generated significant farmer selling of soybeans last week, which pressured US soybean and other oilseed futures including canola. Adding to the downside last week, were funds increasing their net short positions in most agricultural commodities including canola, rapeseed, soybean and soybean oil futures contracts. Funds have held a net short position on oilseeds for six months, profiting as prices were previously trending lower.
Prices turned higher early this week on short covering by funds buying soybean and other oilseed futures. Concerns over northern hemisphere grain production were a catalyst with frost risk forecast for parts of Europe and continuing hot and dry weather in southern Russia, leading to a strong rally in wheat and rapeseed futures.
In Canada, the 14-day forecast for Saskatchewan is for below average rainfall. Saskatchewan grows over 50pc of Canada's canola crop and planting is due to begin in May. Stats Canada forecasts the 24/25 canola crop at 18.1MMT, which is down 0.2MMT on 23/24, due to a slight decline in area planted to 8.7Mha. Funds hold a substantial short position in ICE canola futures and the Nov'24 contract has rallied C$20/t over the past two sessions.
