Ongoing tariff-related trade uncertainty has done little to slow the upward trend of canola contracts on the ICE Futures platform, with values gaining over a hundred dollars per tonne off their nearby lows in the span of a month.
The most-active July contract settled just above $680 per tonne on April 16, having posted losses on only five of the 22 sessions since hitting a contract low of $569.50 on March 17. The futures have blown past all their major moving averages to sit just below psychological resistance around $700 per tonne. The nearby canola contract hasn’t traded above that level in 16 months.
While prices may be nearing overbought levels from a technical standpoint, the underlying fundamentals remain supportive.
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Agriculture and Agri-Food Canada forecasted total canola exports during the current marketing year at 7.5 million tonnes. However, the country has already moved 7.2 million tonnes with three-and-a-half months left in the marketing year. There’s a case to be made that Statistics Canada underestimated the size of the 2024 crop, but even if production was a million tonnes above the 17.8 million-tonne official estimate, there still wouldn’t be enough canola around to keep the current pace.
That means, prices will need to stay strong — at least relative to other markets — to keep the country from running out of supplies before the new crop is available.
The rising prices over the past month may also draw in a few extra acres at seeding time, although the tariff chaos in the background will likely limit any large acreage swings.
China placed tariffs on Canadian canola oil and meal back in March, but not the seed which accounts for most of our business with the country. Meanwhile, general United States tariffs keep being pushed back, but the canola oil and meal, which account for most of our canola trade with the U.S., remain free to move without tariffs.
All of that could change suddenly. In addition, a lack of clarity on biofuel policy out of the U.S. should keep some extra caution in the market with much of Canada’s canola oil heading south of the border, destined to be turned into biodiesel.
