Grain Market Update - Canola (December 2022)

Canola

The following graph shows the movement in ICE November 2022 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$930/tonne equivalent and the domestic price is $711/tonne delivered port. The resulting negative basis of A$219/tonne is almost the equal lowest basis for the calendar year. The corresponding basis for this time last year was -$118/tonne.

The vast majority of canola has been delivered as CANS due to the perceived high proportion of mouldy grain, which to date has not materialised. Harvest pressure and the high yields seen in many parts of the country have caused the current decline in prices since early November, once domestic buyers had filled their immediate supply needs. The future price of canola and CANS in particular, is unknown. The current large negative basis indicates that Australian canola is significantly cheaper than the rest of the world and as such should have some upside in price movements. Prices may however stagnate until Autumn 2023, after which buyers may come back into the market to fill shipping orders for the remainder of 2023.

The domestic canola price at present is a Decile 8 price, calculated on prices from 2011 to date, slightly lower than the same time last year when the price was a Decile 9.

A PKE price of $711/tonne represents $673/tonne local depot with freight to port of $38/tonne, which should be in excess of clients’ Break Even Price at average yields.