Canola prices have been volatile lately, with large one-day moves up or down depending on the day. The market is seeking direction as concerns shift from old crop supplies to new crop prospects. Soybean markets have helped the entire vegetable oil complex, recently hitting new highs. Renewable diesel demand is one of the main reasons for higher soybean prices, and thus, canola prices, as it is expected to benefit both crops significantly in the years ahead. It is also worth noting that the price premium canola has held over other oilseed crops has been eroding somewhat lately and canola historically tends to reach seasonal peak levels in early June.
The new crop November canola contract finished the session on June 8 at $1,063 per metric ton (MT), up over $23.00 on the day. July canola increased to $1,123 per MT, up $9.90. The July old crop canola contract has dropped $30 per MT since May 25, while the November contract increased by $10 per MT, reversing the trend lower from the past few sessions, though it did hit a high of $1,080 per MT on May 28.
The U.S. canola crop is still on track to increase significantly from last year’s levels, while several analysts still predict the Canadian canola crop to be about 5-10 percent larger than the 17.95 million metric tons predicted by Agriculture & Agrifood Canada (AAFC). Drier seeding conditions for Manitoba are seen, which should improve prospects for the crop. More details will be known after the USDA issues its June 30 acreage report.
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In an interesting analysis of recent government forecasts, both the USDA and the Congressional Budget Office are forecasting much lower prices for all commodities after 2022 than what growers are currently experiencing. In essence, 2021 and 2022 are seen as an aberration caused by a combination of tight global stocks, production uncertainty, strong demand for grains from China, and grain disruptions from the Ukraine/Russia conflict. However, their forecasts suggest that the situation is not permanent, and prices are expected to return to current longer-run averages.
So just as the government indicated inflation was transitory, it is now suggesting that high commodity prices are transitory and the robust market will “result in growth in agricultural output, leading to lower prices.” Still, it said that “the timing of price declines is uncertain. The Ukraine/Russia war could have much longer-run impacts than are currently anticipated. How inflation and other events play out is uncertain.”
Local cash prices, as of June 8, at nearby crush plants ranged from $41.31 to $43.45 for June-July deliveries, up approximately $.70 per hundredweight in the last two weeks. New crop canola prices ranged from $37.27-$38.00, up almost $2 in the last two weeks.
Canola planting progress in North Dakota and Montana mirrors the dry western canola growing areas of Canada and the wet areas of the eastern canola growing region in Canada. As of June 6, canola planting progress in North Dakota was at 65 percent, behind 94 percent last year and average for this time of year. Emergence was 12 percent, behind 49 percent last year. With the warmer weather, flea beetles are a concern for growers as they will actively feed on young canola plants.
For Montana, the second-largest canola-producing state, the canola crop continues to be ahead of average, as drier conditions have favored planting progress. Eighty-three percent of the canola has been planted, up from 79 percent last year, while 67 percent was emerged, compared to 47 percent last year.