Local cash canola prices ranged from a low of $14.08 to a high of $14.60 per hundredweight on Aug. 7, which is down about $0.20 from two weeks ago, according to Barry Coleman, executive director of the Northern Canola Growers Association (NCGA). However, the futures market has shown little movement during this time and are at the same level as two weeks ago.
“The futures closed at $448 yesterday (per ton), and that indicates the basis levels have deteriorated as expected as farmer deliveries have increased,” Coleman said. “Delivery levels are expected to increase quite a bit as we move into harvest.
“It remains a choppy, range-bound market in terms of the November futures. The lower range has been $440 and the upper has been $450, and this has been the area where the canola market has been bouncing around at recently.”
The crop conditions in July, in both Canada and the U.S., have given the impression of improving crop production, and Coleman said the markets have already taken this into consideration and become range-bound. Prices continue to be very depressed compared to prior years.
The market is still expecting about a 3.9 million ton carryover of North American canola stocks next year. The European Oil World recently came out with a forecast of a 17.5 million ton crop in the European Union (EU), which is below earlier estimates of 18.7 million tons. This is beginning to look like it won’t be a short-term blip, but rather a long-term trend as the EU has put several restrictions on crop protection chemicals and a continued ban on GMO products.
“This means the EU might be importing more canola in the future, which would be positive for the future and they are saying Canada is the logical supplier of that canola,” Coleman said. “However, their ban on GMO products might make filling the void of EU production hard to fill, since almost all of the U.S. and Canada canola is GMO production.”
The Chinese ban on canola from Canada remains in effect at this time, however a recent report out of the University of Ottawa questioned the reduced canola demand from China was from a trade war or a long-term shift in Chinese policy toward production of their own canola rather than importing it.
Coleman said he tends to side with the NCGA and the industry that claim this is due to a trade war situation. However, Coleman has also noticed China is putting the mechanism in motion in other countries, such as soybean production in Brazil, for their import needs. This indicates the need to find more and new markets for canola and soybeans in other parts of the world.
The current crop conditions in North Dakota indicate 72 percent of the canola crop is in the good-to-excellent condition, he noted, with about half the crop now coloring, which is behind average. He expects canola harvest will get underway around Aug. 20.
Finally, Coleman attended the meeting in Fargo on Aug 5, where the latest information on the Market Facilitation Program (commonly referred to as MFP 2) was revealed. At that meeting, Coleman stressed the need for USDA to take into account the collateral price damage done to other crops due to the loss of soybean exports to China. This could be even more important, since in the last couple days Coleman has heard some talk that there might be a MFP 3 that help with marketing problems next year.