Grain Market Update - Canola (July 2021)
The following graph shows the movement in ICE November 2021 Canola Futures price expressed in A$/tonne and the domestic canola price delivered Port Kembla at the 1 July. Also included is the 10 year average ICE November Futures price expressed in A$ and the 10 year average domestic price at Port Kembla.
The price for canola has seen a spectacular rise since the beginning of the year, with the Port Kembla delivered price peaking at $784/tonne. The price has been very volatile since this early June peak, with the domestic price currently sitting at A$739/tonne. The domestic canola price rise has mirrored the ICE futures price which peaked at a much higher price of A$827/tonne.
However the domestic price has fallen more rapidly than the ICE Futures price, possibly due to Australia’s crop outlook improving, plus some forward selling taking place. The ICE November Futures price is A$824/tonne equivalent at present. The resulting negative basis of A$85/tonne equivalent is A$171/tonne lower than the basis at the same time last year.
The very high canola price is due to production issue concerns for oilseed crops globally, resulting from the extremely hot and dry weather in the Canadian Prairies, coupled with France’s Agricultural Ministry forecasting their smallest crop for two decades.
One significant event which may put downward pressure on the domestic canola price, is that the North American soybean crop and the Canadian and European canola crops will be harvested prior to Australia’s canola harvest.
On a positive note, the domestic price in the last few years has not been greatly influenced by domestic supply. Therefore if Australian production as forecast is above average, the price should be relatively stable.
The domestic canola price at present is a Decile 9+ price, calculated on prices from 2009 to date.
A PKE price of $739/tonne represents $701/tonne local depot with freight to port of $38/tonne. This is significantly above the average budgeted Break Even Price for clients at budgeted yields of $466/tonne.
