Producers who want to know where canola prices are heading this winter should pay close attention to Brazil’s soybean crop, says an analyst.
But the return to a normal crop in 2022 will restore the traditional relationship, and that means all eyes should be on what transpires in the southern hemisphere.
The critical period will be Dec. 15, 2022, to Jan. 15, 2023, when Brazil’s crop is in the flowering and podding stage of development.
“Make a note of that on your calendar,” said DePutter.
Ranulf Glanville, chief market analyst with DePutter Publishing, noted that the U.S. Department of Agriculture is forecasting record South American soybean production despite dryness concerns in Argentina.
FarmLink chief market analyst Neil Townsend believes there is “definitely upside” for canola prices based on strong demand out of China and the U.S. market, where renewable diesel is taking off.
But there is another bearish market dynamic that could factor into canola prices.
The USDA expects world vegetable oil prices to tumble, which could pull down canola prices.
Palm oil is the most widely traded vegetable oil in the world and Indonesia is the biggest exporter of that commodity, accounting for 56 percent of world trade.
Indonesia’s palm oil exports fell a staggering 16 percent in 2021-22 but are expected to rebound and then some in 2022-23.
The USDA is forecasting 28.5 million tonnes of exports, a massive 26 percent increase over 2021-22 levels.
The government of Indonesia started implementing export restrictions in January 2022 in response to high domestic cooking oil prices.
A variety of measures were introduced culminating in a complete ban announced in April, which caused exports to plummet to 183,000 tonnes in May, down from normal volumes of about two million tonnes.
The ban was lifted in late May and replaced with an export levy, which has since been waived until the end of October 2022.
Exports responded positively to the policy stability, reaching a five-year monthly high in August.
“The recent resumption of palm oil exports from Indonesia has driven down global palm oil prices and increased the discount between palm and soybean oil to record levels, offering some relief to global vegetable oil markets,” stated the USDA in its recent Oilseeds: World Markets and Trade report.
The forecast for 28.5 million tonnes of palm oil exports assumes no new export bans will be implemented in 2022-23.
