Canola market volatile as tariff concerns override tight supplies

Source:  Farm and Ranch Guide
Канада

Тhe canola market has paused its upward movement recently as tariff concerns seem to have overridden the impact of tightening canola supplies. There is uncertainty about how a tariff on Canadian canola products (oil, meal, and seed) would potentially change basis levels in North Dakota. There are some predictions that local basis would increase while ICE canola futures prices would drop. Local canola basis could possibly become strongly positive with local prices increasing. However, this would be uncharted territory for the canola market and the final impacts remain to be seen. There is some talk that tariffs will be delayed again.

The U.S. accounts for 96 percent of Canada’s canola oil exports, up from 55 percent five years ago. Any tariffs would have a negative impact on this trade flow. As of Feb. 26, there is still uncertainty whether tariffs will be delayed again.

Canola exports and domestic use from Canada for the current crop year continue at a strong pace as total exports of 5.8 million metric tons (MMT) exceed year ago levels of 3.1 MMT. Canola crush year to date (August through February) of 6.4 MMT exceeds last year by 600,000 metric tons (MT). More canola exports are predicted to go to Europe this spring as Chinese interest drops off.
Canola crush in the U.S. for the crop year to date is 1,057,000 tons, a slight increase over last year. This is based on data for August through December. December canola crush in the U.S. was up significantly from last year at 225,039 tons.
Market sources say that managed money has now switched to a net long position in canola, after being net short for an extended period. Canola oil basis is reported to be soft owing to uncertainty over the 45Z guidance for biofuels.
So far during the month of February, which is the month that the Projected Price for Revenue Insurance is set for many commodities, canola is at $21 per hundredweight. Final prices will be set in the first week of March after the full month of prices have been gathered. The Projected Price for canola last spring was set at $20.30 per hundredweight.

The USDA issued its annual Crop Values Summary on Feb. 26 that showed the value of canola in North Dakota for 2024 was $788 million, down 6 percent from last year on a lower season average price for canola of $20 per hundredweight. Total canola value for the U.S. was $952 million.

The March ICE canola futures finished on Feb. 26 at CAD $648 per MT, up $2.60 on the day but down $12 in the last two weeks. The May ICE canola futures contract closed at $664 per MT, up $7.40 on the day but down $5 in the last two weeks. The May contract recovered some of its losses from earlier in the week, closing above the 20-day moving average. Market analysts report it is maintaining its upward trendline off the November lows.
Local cash prices on Feb. 26 at nearby crush plants ranged from $19.51 to $20.75 for February and March deliveries, down $0.10 to $0.39 per hundredweight in the last two weeks. April and May canola prices ranged from $19.51 to $20.81, down approximately $0.25 to $0.60 per hundredweight in the last two weeks.

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