Grain Market Update - Canola (July 2023)

The following graph shows the movement in ICE November 2023 Canola Futures price expressed in A$/tonne, MATIF November 2023 Canola Futures expressed in A$/tonne, plus the domestic 2023 canola price delivered Port Kembla. 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 ICE November Futures price is A$836/tonne equivalent at present, with the Port Kembla delivered price being $655/tonne. The resulting negative basis of A$181/tonne equivalent, is A$47/tonne greater than the basis at the same time last year.

As demonstrated by the graph below, the domestic canola price has recently been following the lead of MATIF prices from Europe, more closely than the Canadian ICE market. This may well be an indication that the dominant destination for Australian canola is Europe, resulting in the Australian market being influenced by MATIF to a greater extent.

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. The last few seasons of high canola production, has led to a significant surplus of canola domestically, which has not been easily exported due to supply chain issues. Therefore, if Australian production is forecast to be above average, the negative basis seen for the last two seasons may remain.

The domestic canola price at present is a Decile 8 price, calculated on prices from 2011 to date.

A PKE price of $655/tonne represents $617/tonne local depot with freight to port of $38/tonne. This is above the average budgeted Break Even Price for clients at budgeted yields of $599/tonne. This indicates that for almost half of RMS’s budget client base, yields will need to be greater than average or costs less than expected, for them to make a profit from canola.