Golden canola price loses some lustre as prices fall
After reaching record highs, global oilseed prices are falling due to improved weather conditions in key growing areas of the Northern Hemisphere.
In the past month, Australian canola prices have dropped by around $100 per tonne, while Canadian futures have lost $150 Canadian a tonne.
The price drop is not good news for Australian farmers who have planted their largest canola crop area of just under three million hectares.
But volatility in the market at this time of year is normal, according to Thomas Elder markets analyst Andrew Whitelaw.
“We’ve seen really quite a bit of a sell-off in all commodities in the past week to two weeks, everything from wheat, corn to soybeans, to even lumber and forestry products,” he said.
“This time of year, between the end of May and the middle of August, is when things are really exciting for pretty much all grains.
“The reason behind that is that the majority of the world’s wheat, corn, soybean and canola crop is in the production phase in that period.
“If something goes wrong, like a little bit of hail in France or a bit of flooding in the US, it can cause the market to react.”
American soybean futures prices experienced their largest single-day fall last week but bounced back the next day, another reflection of market volatility.
Mr Whitelaw said oilseed prices had also softened due to large global planting areas of canola and soybeans, including Australia’s record canola crop planting.
Prices to go up again?
Canola prices in Australia neared $800 a tonne last month, and while Mr Whitelaw said prices had been “overheated”, they may yet spike again.
“The reason why canola increased in value so much was off the back of weather concerns in the US and Europe, however, things have started to improve,” he said.
“We are seeing some pretty beneficial weather across large tracks of the US soybean growing area, and a little bit of improvement in areas of Canada where the canola crop is grown.”
However global stocks of oilseeds remain very tight, and this could easily see prices rise again.
“If something does go majorly wrong in one of these growing areas, then we have potential to see some pretty strong upward movement, back up to where things have been, or at least half the way,” Mr Whitelaw said.
He said even at its reduced price of just over $700 a tonne in WA and just under $700 in the east, in a historical context, Australian canola prices were still very strong.
“Historically a lot of farmers that we speak to would say anything with a six in front of it is good, so anything with a seven in front of it is fantastic, and hopefully some people did some forward selling when there was an eight in front of it,” he said.
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