Supply-side limitations won’t support canola indefinitely

Canola recovered some of its losses over the past week

Blooming rapeseed field at sunset

Until tensions between Canada and China are alleviated, there will continue to be little demand for canola.

Usually taking 40 per cent of the canola Canada grows, China is the country’s most important customer for that crop. Japan is a distant second and while lowered canola prices have become attractive to other buyers, it remains unlikely that demand could effectively replace sales to China.

Saskatchewan MP and federal Public Safety Minister Ralph Goodale fired Canada’s first verbal salvo at China last week, stating China has yet to ante up any evidence to support its claim that canola from Richardson International and Viterra were infested with hazardous pests.

Prime Minister Justin Trudeau opined that he would consider sending a high-level delegation to China to discuss tensions between the two countries, but little, if anything, has come from Trudeau since then.

Manitoba’s Agriculture Minister Ralph Eichler, threw his support behind the delegation idea.

In the meantime, the trading of verbal barbs may be the only movement between Canada and China.

Until then, Huawei executive Meng Wanzhou continues to sit through her extradition hearing in Vancouver. Meng was the catalyst to the situation after Canadian authorities nabbed her in Vancouver in December at the behest of the United States. The latter is determined to charge her with fraud if the extradition moves ahead. That could be several months or years down the road.

Two Canadians have since languished in China, detained in December by authorities who have accused them of espionage. A third Canadian, already in prison in China, faces execution after his prison sentence was changed to the death penalty.

Over the course of last week canola gained $10 per tonne, taking back a good chunk of the drop in prices that followed when news broke earlier in March that Richardson was banned from selling canola to China.

Short-covering has aided the recovery, but that cannot last forever. About the only supports canola has right now are spring road bans across the Prairies, which limit farmers’ ability to deliver; notions of farmers seeding fewer canola acres this spring; and canola becoming more competitive with other vegetable oils.

Tensions need not be alleviated to boost canola in price. As trade talks between the U.S. and China have shown, even that can influence the market in a positive manner.

The sooner Canada gets a delegation in order to travel to China, the better.

About the author


Glen Hallick - MarketsFarm

Glen Hallick writes for MarketsFarm specializing in grain and commodity market reporting. He previously reported for Postmedia newspapers in southern Manitoba and the province’s Interlake region.

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