Canada: Canola price creeps higher despite slow export levels

The demand situation in canola still looks worrisome, but its price has crept up from the autumn low set in October.

In addition to weak exports, the poor performance of soy oil and crude oil also weigh on canola’s outlook.

In the oilseed complex, soybeans have performed the best this fall since the United States and China decided to cool their trade war.

For weeks president Donald Trump boasted of forthcoming soybean sales to China, but there were no confirmations.

On Nov. 17, traders told that China had finally booked 840,000 tonnes for shipment in December and January. The next day, the U.S. Department of Agriculture confirmed China bought 792,000 tonnes.

The hope that China would again buy American soybeans buoyed soybean futures.

From Oct. 1 to Nov. 18, the nearby soy futures contract rose almost 11.9 percent.

In the same period, canola futures rose 5.8 percent.

But soy oil, which has a large bearing on canola prices, rose only 3.5 percent in that period, and crude oil, which can support vegetable oil because of the biofuel link, fell 1.1 percent.

Soy oil is still weighed down by uncertainty about American biofuel policy, and crude oil is in the doldrums because of large global supply as the Organization of Petroleum Exporting Countries ramps up production.

It is good to see that canola futures can rally a little even when the deck is stacked against them.

Canola’s cash price is also up, with the rise in futures complemented by a narrowing of the basis.

According to PDQInfo.ca, the basis for the nearby futures improved. For example, in northwestern Saskatchewan, the basis Nov. 18 had improved to about $42 per tonne under the December futures, whereas in the first half of October it ranged around $55 to $60 under.

Demand from the domestic crushing sector is still solid with 3.175 million tonnes processed to week 14 of the crop year ending Nov. 9, down only slightly from 3.249 million last year at the same time.

However, exports are weak with shipments at only 1.544 million tonnes, less than half of the hot pace last year when 3.365 million tonnes had been shipped.

It is also slightly worse than 2023-24 when 1.65 million tonnes had moved, and that year was considered weak for exports.

As China’s 76 per cent tariff on Canadian canola seed blocks sales to that traditional top buyer, we look to other markets to take up the slack.

But one of those alternatives, the European Union, is slashing imports of canola and other oilseeds this year.

It had a good crop itself and demand from its biofuel sector is down.

From July 1 to Nov. 16 its canola imports fell to 1.38 million tonnes, down 42 percent from the same period last year.

Canada supplied 21,159 tonnes in that period, down from 88,184 tonnes last year in the same period.

The European Union gets the lion’s share of its canola imports from Ukraine and Eastern Europe.

It also gets some from Australia, and there is speculation that Canada might take that market share as Australia take’s Canada’s market share in China.

Australia this month shipped its first shipload of canola to China in five years.

As for Canada getting back into China, there is no change yet, but agriculture minister Heath MacDonald recently spent a week there meeting with senior government, research and commercial agriculture representatives.

MacDonald feels the relationship is thawing.

However, Canada will likely have to shift its position on importing Chinese electric vehicles before China welcomes back Canadian canola.

In the meantime, canola’s price direction will depend on improving exports to other buyers and more clarity on American biofuel policy.

At issue is whether large U.S. refiners will have to make up for waivers that small refiners received on biofuel blending regulations. This will affect how much soy oil and other vegetable oil is used to make biofuel. The decision was delayed by the U.S. government shutdown.

If large refiners have to make up the difference, then demand for vegetable oil will rise and that will support soy oil and canola.

Another modest support for oilseeds might come from palm oil.

Palm prices could rally strongly in the new year, according to analysts at an industry conference in Bali.

Thomas Mielke of Oil World said the price could climb about 20 per cent over the next six months.

Another influential analyst, Dorab Mistry of India’s Godrej International, forecast a potential 31 per cent increase.

Major producer Indonesia plans to increase the palm component in biofuel to 50 per cent, leaving less for export.

Also, the sector is in tumult after Indonesia’s military seized palm plantations, alleging they operate without proper licences and contravene environmental laws.

Tags: China, price, canola, United States, soybeans, soy oil, futures, demand