Grain Market Update - Canola (July 2024)

Article written by : Michael Jones, Grain Focus, Young

The canola market has been much more resilient than the wheat market over the past few months. After dipping in June, the local canola price has recovered all of the losses this month. At the time of writing, Port Kembla canola bids were at $755/mt which is a Decile 8.5 on the 10-year spectrum or Decile 7 on a 5-year range. It is a more attractive proposition than wheat if considering forward sales.

Canola basis is currently sitting right on the 10-year average at $66/mt under European rapeseed values.

Canola is a small part of a much larger oilseed market and gets price direction from major oilseed crops, such as soybeans and palm oil. Oilseed markets rallied in May as Brazil’s soybean crop was hit by severe flooding as harvest was finishing up. Once this news was digested and the actual losses became known, oilseed markets then followed the lower trend in other grains during June. This month soy oil has been surging higher and this has pulled canola up with it. Strong demand from the renewable fuel sector is a factor.

Upside potential

• European rapeseed production is expected to be down this year due to a smaller area sown and adverse weather during the growing season. Harvest has just begun and yields are so far disappointing.

• Demand is growing for canola oil from the bio-fuels sector as Europe looks to phase out palm oil and used-cooking oil in the production of biofuels.

• Ukraine and Australia are both expecting smaller crops than last year.

Downside potential

• Canada’s canola area sown was bigger than initially expected at 22 million acres

• US soybean and Canadian canola crops are currently in good shape with no reason at this stage for not achieving solid yields. August is a key month for both crops.

• South American exporters still have large volumes of soybeans to move.

The information contained in this article is given for the purpose of providing general information only.