Grain Market Update - Canola (October 2021)

The following graph shows the movement in the ICE November 2021 Canola Futures price expressed in A$ and the domestic canola price delivered Port Kembla. Also included is the 10 year average ICE November Futures basis for the domestic price at Port Kembla, plus the corresponding basis for the current year. 

At present the ICE November Futures price is A$960/tonne equivalent and the domestic price is $932/tonne delivered port. The resulting negative basis of A$28/tonne equivalent, is A$93/tonne lower than the basis at the same time last year and A$81/t lower than the 10 year average basis for this time of year of positive A$53/t.  

The graph below illustrates the large negative basis seen during July and August. The basis has reduced significantly throughout September ie become less negative, due to the futures market reaching an upper limit of around A$950/t, while domestic prices have increased at a greater rate to stimulate sales from growers.  

However, Australian canola is still very cheap in comparison to the international price. This would indicate that prices should remain strong throughout harvest and into 2022, assuming no drastic changes to the economic and production outlook for Europe and North America. 

The domestic canola price at present is a Decile 10 price, calculated on prices from 2009 to date. This compares with an almost Decile 9 price at the same time last year.  

A PKE price of $932/tonne represents $894/tonne local depot with freight to port of $38/tonne. This is likely to be well above clients’ Break Even Price at budgeted yields, which should provide a significant profit margin.