Canola prices took a large drop on March 29 when the Canola Council of Canada put out a press release saying that China has stopped all canola imports into China from Canada, according to Barry Coleman, executive director of the Northern Canola Growers Association.
“The market dropped quite heavily that day, and has rebounded somewhat,” Coleman said. “Since March 1, when the first ban on canola imports was announced by China, the futures contracts have ranged from $448-$468, and right now we are in the middle of that range at about $458 a ton. This points to the on-going struggle of the contract’s 20-day moving average.
“There is also news that a third Canadian exporter has been banned, but the market isn’t really reacting much to that news today, which is showing some resilience in the canola market.”
The trade disruption is due to the arrest in Canada earlier this year of the CFO of Huawei Technologies. The U.S. requested she be arrested while she was in Canada.
The canola industry in Canada is pointing to about a 10 percent reduction in canola acreage and they are still concerned about the rising ending stock of canola in Canada should China continue to keep its ban in place.
“Canada is sending a high level delegation to China to try and resolve the situation, which has been elevated to a higher rank in the government and there is now concern that other commodities in Canada will be added to the list,” Coleman said. “There is also talk of compensating the canola growers in Canada for the impact these trade issues have had on them. We have certainly requested something down here as well from the U.S., because we have been deeply impacted by the soybean tariffs.”
China originally intended to import 4.7 million tons of canola and now they are looking to not even getting to 3 million tons for the current year, which is a 36 percent drop in canola that was planned to be imported into China, according to Coleman. Canola crushing plants cannot be easily switched over to the processing of other oilseed crops on short notice and the China government cannot afford to let canola oil supplies run low for the consumers in China.
“If China was to suspend all canola purchases, sales to other buyers in the world such as Pakistan, Mexico, Japan and others would have to increase by 1.3 times to make up that lost business,” he said.
Domestically, the Prospective Planting Report came out and it indicated canola plantings in North Dakota, the nation’s largest canola producer, would be 1 percent less when compared to last year’s plantings to 1.57 million acres this year.
“This was kind of a surprise since the industry was expecting a bump in acres, but higher forecasted fertilizer prices may have been the reason for the intended cut back,” he said. “We are expecting a good start to the planting season with the snow melting in an orderly fashion, so we don’t see any potential surprises as far as getting in the field this spring.”
The most recent cash prices for canola at local crush plants ranges from a low of $15.20 per hundredweight (cwt) to the high end price of $16.45 per cwt. This down about 40 cents per cwt on the low end from the figures quoted two weeks ago.