There was little doubt canola was to have been on the upswing for most of this week. Signs of forthcoming gains were evident on April 9 as prices moved well off of their lows, though canola contracts still finished that Friday with small declines.
A number of factors have combined to rally canola this week. The most evident are the tight old-crop supplies, as buyers are seeking to squeeze every last nodule of the oilseed out of the farmers’ bins.
Another is the persisting dry conditions across much of the Prairies. The melding of two systems brought up to 25 centimetres of snow to some locales, while other areas received scant amounts at best. The moisture-laden snow has still proven to be not enough against dryness throughout the region, and the outlook for little precipitation over the coming weeks doesn’t bode well for thirsty dirt and subsoil.
The influx of fund money into North American markets also has lent its support, with canola among the beneficiaries. With a number of government economic stimulus programs, the continent’s stock markets have set record highs, bringing the commodity futures along for the ride.
However, any fickleness could just as easily send those nice canola prices tumbling. As prices rise, the obvious desire to reap profits seeps in and gains are soon replaced by declines. But the volatility deeply embedded in the current market means price swings back and forth are inevitable as well.
This will be the situation until there’s some sense of assuredness for the incoming crop. Agriculture and Agri-Food Canada (AAFC) initially projected canola plantings for this spring to be 20.1 million acres. Chatter in the markets has suggested there could be more canola going into the ground because of the good prices. Regardless of which way canola plantings may go, we will get a clearer picture of things once Statistics Canada issues its first survey-based planting intentions of 2021 come April 30.
Then there are the ending stocks. While 700,000 tonnes is a massive pile of canola to a person’s eyes, such a number is the fuel for the tight supplies supporting old-crop values. Let’s remember there were about 20 million tonnes gleaned off of the fields during the harvest of 2020.
Strong demand, from within Canada and around the globe, has seen a turnaround in canola’s fortunes. The shattering shock wave that ripped through the canola market when China ceased importing through Viterra and Richardson International has long subsided. China has been busily buying whatever oilseeds it can to placate its voracious appetite.
While that has made for good times in the canola market, as well as for soybeans and others, there’s a need to watch the resurgence of African swine fever in China. Not long ago, the disease devastated the country’s hog industry and could again if infections were to get out of control.