Despite a few bumps in the road, there wasn’t too much of an impact on canola futures during the week ended June 19. During that time, the oilseed on the Intercontinental Exchange was still ahead by nearly $36 per tonne in its November contract.
Canola prices shot up significantly after the Environmental Protection Agency proposed changes to United States biofuel policies. That announcement generated a surge in soyoil on the Chicago Board of Trade, with spillover giving canola a sizeable boost.
MarketsFarm analyst Mike Jubinville said canola would likely be $30 per tonne lower if it wasn’t for the EPA’s announcement.
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Jubinville said that if the U.S. were to continue excluding foreign canola from its biofuel tax credits, there would still be strong demand for the Canadian oilseed. That’s because the biofuel industry’s appetite for soybeans is impacting those for food use and that would be fulfilled by more canola and its products flowing across the border.
There are other factors underpinning canola as well. Foremost are the tight old crop supplies, which became tighter as canola exports surpassed 8.8 million tonnes and domestic use exceeded 10 million tonnes. Both are ahead of where they were at this time last year, especially the exports.
Then dry conditions across about 40 per cent of the Prairies have spurred concerns about the new crop. Rain is needed, and farmers would greatly welcome a drink from Mother Nature during the weekend of June 21 and 22. If it doesn’t come, then there might be a stronger upward push in canola futures.
China remains a wildcard. It still has 100 per cent tariffs on imports of Canadian canola oil and meal while leaving the seed alone — for now. Sooner or later Chinese authorities will announce the findings of their investigation into alleged canola dumping by Canada. Any punitive measures against Canadian canola will have a dire impact on the oilseed’s prices.
Analyst Jerry Klassen of Resilient Capital suggested there could be behind the scenes talks going on between Canada and China to resolve their tariffs issues.
Should such be occurring, hopefully an agreement is also reached on canola seed as to avert any negative impact from China’s investigation.
As to what transpires in the weeks is largely unknown, with Klassen saying “canola has shown us it can swing quite sharply in a short amount of time.”
Canola futures could see $800/tonne in the next week or two, or they could slip below $700.
