Brennan Turner
FarmLead
As Halloween has passed and we remember our fallen heroes on Remembrance Day, it’s important to remember what was happening a year ago.
November 2016 was the first opportunity to participate in a healthy rally at a great sellable value. Recently, the January 2018 canola contract climbed above $520 CAD per metric tonne on the futures board, but still short of the high it sent in July when it rallied above $535 CAD. A rising Canadian Loonie also made it difficult for canola prices to squeak out more gains. However, there are several bullish factors that canola traders are eyeing. One is how the U.S. will adapt to less soy oil imports from Indonesia and Argentina.
After placing heavy tariffs on them, it’s expected that U.S. imports will decline and domestic American demand for soy oil will increase to meet biodiesel capacity. However, there’s a debate that too much American soy oil gets exported, and there’ll be a shortfall. More specifically, Scott Irwin from the University of Illinois thinks that some of the 13.8 Billion pounds of soy oil used for food, feed, and cosmetics in the U.S. could be diverted to the biodiesel sector.
Enter canola. Canadian canola oil could be used directly by American biodiesel plants, or replace soy oil in food, feed, and/or cosmetic markets. It’s not going to happen immediately, but it’s one bullish factor that we’re keeping our eye on for canola prices. (We have seen a lot of $12 CAD / bushel for 1Q and 2Q2018 movement trade on the FarmLead Marketplace).
Another factor affecting canola prices may be Australia’s smaller canola crop. Currently, the USDA is forecasting 3 million tonnes of canola production in the Land Down Undaa. This is the highest estimate though. The International Grains Council (IGC)) and Rabobank both dropped their estimates recently to 2.7 and 2.6 million tonnes, respectively. That’s a significant drop from last year’s 4.14 million-tonne canola harvest by Australian farmers. Currently, ABARES (the USDA equivalent in Australia), expects a 2.75-million tonne harvest. This includes 2.04 million tonnes of exports, but that would be a 43% decline in exports year-over-year.
Overall, a weaker Canadian Loonie continues to support higher cash grain prices in Western Canada. As such, Canadian wheat prices have been making a decent push higher lately and there might be even more legs left in the rally. We said all the way back in September to hold on to better quality wheat and oilseeds. In the next few days and/or weeks, pulling the trigger on a sale is a good idea. Perhaps it’s worth remember what sort of position you were in a year ago. Grain prices are fairly similar. Is your grain marketing plan going to be the same? Or different?
To growth,
Brenna Turner