When British rock band Queen wrote its 1981 smash hit “Under Pressure”, featuring David Bowie, it could have been foretelling this canola market.
Lyrics like “these are the days it never rains but it pours” could describe recent weather on the Prairies. Agriculture and Agri-Food Canada’s Canadian Drought Monitor reported 67 per cent of the Prairies are in dry condition, down from 99 per cent in April.
While AAFC estimated canola production at 18.1 million tonnes for 2024-25 in May, the rains may have growers anticipating higher yields and production. If Statistics Canada’s acreage estimate is correct (21.4 million acres), an average yield of 40 bushels per acre would be needed for 19 million tonnes. The last time those figures were realized was in 2020-21.
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Right now, notwithstanding a myriad of factors, canola prices on the Intercontinental Exchange, at $620 to $650 per tonne, are at their lowest for this time of year since 2020. Canola crush margins are $60 per tonne lower than one year ago. Recent weakness in European rapeseed and the Chicago soy complex, together with fund positioning, also weighed on prices.
Figures from the United States Department of Agriculture are also pushing down on canola. In the USDA’s June supply/demand estimates released June 12, there were few month-to-month changes to soybean numbers but the U.S., Brazil and Argentina are still anticipated to have more production, more exports and more ending stocks in 2024-25 than the previous year.
Can’t we give canola one more chance? The July contract hasn’t yet broken below the $620/tonne support level in June. November canola hasn’t yet done the same at $640/tonne and the potential for adverse weather will always bump up prices during the summer months.
The U.S. Federal Reserve’s recent decision to hold its key interest rate steady, as well as a widening spread between canola and European rapeseed, will make canola more attractive to buyers.
