Key Points
- Canola prices have remained resilient against price falls in offshore futures markets.
- After dipping below $500/t in SA, prices are now back to those levels giving another selling opportunity.
- Oil seeds are under pressure from stock rebuilding, but were not hit like wheat was in the latest USDA Report.
- Chinese demand continues to underpin current price levels for all oilseeds.
- New season prices will be up against a large Canadian supply (large carryover from this year plus production) and increasing world oilseed supplies
Futures
Canadian canola and EU rapeseed futures have both been falling steadily since early December. As the chart below shows, canola (green line, LH Axis) has fallen more sharply than Matif (EU) rapeseed prices (black line).
Our prices are more closely correlated to EU prices this year, alt- hough eastern states prices have had support from lower production levels and the harvest shipping program.
Canadian prices are under pressure from their record large crop. As well, they have had logistics issues which has slowed the export of all grains, and will exacerbate the growth in stock levels to carry into the next marketing year.
In the EU biofuel demand for rape has peaked and pulled back a little. This has reduced demand in that region. As well, there have been increased supplies available from their own crop (with the exception of the UK crop) and from nearby crops in eastern Europe and the Black Sea.
In some respects the international canola market is the mirror image of last year. 12 months ago Canadian futures rose above other prices because of shortages in that market. This year the reverse has happened because of an oversupply in the Canadian market, and an inability of that oversupply to be available to the world market in the short term.
Australian Prices
Australian prices have held up against the Canadian futures market because of the better price levels being seen in Europe. We also had early demand from China which paid a premium over prices into other destinations.
The Chinese demand helped strengthen east coast prices compared to Adelaide prices, but more recently the premium being held in that market has pulled back a little.
Today (Jan 16) canola prices have moved back to $500 per tonne in the Adelaide port zone against another lift in EU prices.
This represents another selling opportunity for those who decided not to sell all their canola at harvest time.
New Season Canola
Current March canola futures are priced at A$435.17 /t (16 Jan 2014). New season November futures are on A$466.84/t. Rather than reflecting a premium for new season prices, it is more indicative of the discount on current prices in the Canadian market.
Current Australian old season prices of $500 per tonne will not trans- late into $530 per tonne new season because of the current very high basis levels. At more normal basis levels, the current November futures price would be closer to a new season cash price of $475/t. That is not attractive against new season wheat at $260 per tonne.
The new season market will have the large Canadian carryover hanging over it. Even if the Canadian crop pulls back this year, their total supply available in the 2014/15 marketing year may not fall enough to prevent an oversupply from that major source of canola for world markets.
Our final price prospects will be determined by the size of our own crop (particularly in eastern Australia), demand for our canola into Europe, and demand for oilseeds into China. That won’t begin to unfold until after July.
