The canola futures market has been grinding higher since its recent low established in June. On July 23, the futures for new crop canola reached $485 per ton, a number that has been a resistance level. The market hasn’t been able to break through that price point yet, says Barry Coleman, executive director of the Northern Canola Growers said.
“There has been a lot of farmer selling activity recently, and some involved with the markets feel this farmer selling action has stalled some of the recent price rally,” he explained.
The price range at the local crush plants ranged from a low of $15.19 to a high of $16.09 per hundred weight on July 23.
Weather and Chinese trade relations are the main drivers in the grain market right now, according to Coleman. He also noted the world vegetable oil market is quite bullish right now. Chinese canola prices rose to a seven-year high in overnight trade, with reports of increased pork congestion as cargos are tested for COVID-19 and the fact that China has brought in less canola compared to other years. This has resulted in very good margins for crushers and the shortage of canola oil will be difficult to change in the short-term.
“Chinese canola prices have gained about a third since May 27 when the extradition of the Huawei executive, Meng Wanzhou, to the United States came closer, where she faces sweeping fraud charges,” he said. “One Chinese official said there is a shortage of canola oil, but they can’t bring in the canola right now because they are having poor relations with Australia, which could be another source of canola for China. Between Canada and Australia, the Chinese have kind of shot themselves in the foot and lost some major market suppliers for canola.”
The ending stocks for canola keep ratcheting downward, with the latest carryover of Canadian canola at 1.9 million tons.
Finally, the supply of Malaysian palm oil is expecting to be cut by 25 percent because the country is not able to bring in migrant workers to help with the harvest due to the COVID-19 pandemic. This is also supportive of higher vegetable oil prices in the world.
The canola crop condition is listed as 65 percent good-to-excellent in North Dakota, for the week ending July 24, which is down from the 71 percent released the prior week by the NASS weekly report. The crop in Canada appears to be around 74 percent in the good-to-excellent category, according to Canadian reports. Ninety-five percent of the North Dakota crop is blooming with about 10 percent starting to set pods.