Canola prices continue to surge upward in what Barry Coleman, Northern Canola Growers Association executive director, terms a “counter-seasonal rally.” Harvest time is normally a period lower market prices, but this year the opposite is true.
Cash prices on Sept. 1 at local crushers ranged from $15.65 to $17.10 per hundredweight (cwt.). This is an increase of 50-80 cents since our last report. Future prices are also showing strength – with the Sept. 1 quote being $499 per ton, Coleman noted.
“We bottomed out twice in August around the $485 level and we have come back to be in the $499 to $500 range,” he said. “They say canola has been the good news story and that the futures closing price right now is the highest canola has been since January 2019, which dates before the trade war with China. The canola market has certainly pushed through the highs we experienced in late July and is testing final resistance where it is at right now.”
Ag Canada recently raised their price forecast for next year by $10 per ton through the $490 to $530 range.
According to Coleman, the positive trend in canola prices is due to three factors: a lower than expected 2020 crop in Canada; spec fund activity in the oilseeds market; and a daily dose of Chinese buying in the market.
Spec funds have gone from “net short” to “net long” positions, which has been a plus for the market.
“Some view this oilseed rally we have seen in August as a pricing opportunity, at least for the portion of crop that must be marketed during the fall season,” he said. “The price of soy oil and the corresponding increase in canola prices has been due to the draw down in palm oil and canola stocks.”
The North Dakota crop remains in 75 percent good-to-excellent condition, which surprised Coleman due to the dry weather we experienced in much of the state in August. Twenty-seven percent of the canola crop has been harvested, as of the end of August. There have been several reports of yields of over a ton per acre in the southwestern area of the state, with very little disease pressure compared to last year. In addition, Coleman recently received some reports from the northeastern region of the state that some early-planted canola was yielding over 2,500 pounds per acre.
However, early harvest reports out of Canada are indicating lower yields than what they had anticipated, according to Coleman. It is now estimated the annual drawdown of canola stocks from North American will be over 21 million tons and we don’t have a 21 million ton crop coming, so with the ending stocks forecast to be tighter than normal, the prices will have to adjust upward to reflect. Therefore canola demand and prices may be even higher over the next six months.