Canola has been helped by a demand-driven vegetable oil rally in recent weeks, and some analysts think the rally can continue or at least the gains held.
“It’s purely driven by demand, which is good,” said Errol Anderson, editor of the ProMarket Wire.
Any dips will be met by additional buying, he said.
“If it does drop, it will be supported by buyers. It’s reasonably firm.”
Canola’s gains have been weaker than soybean oil’s 10 percent rally, but the gains in canola futures from just below $450 per tonne at the start of August to around $470 near the end of September seemed to at least temporarily end the long rout that began in mid-June.
Analysts say a host of factors have caused vegetable oil crop prices to rally, including another weak monsoon in India, crusher-stalling typhoons in China, continuing strong Chinese demand for vegetable oil amidst temporarily disrupted production and bad harvest weather in the United States and Canada.
Palm oil production is still lagging, depressed by last winter’s El Nino dryness in Malaysia and Indonesia. Palm prices have led the rally, but soybean oil and soybeans have followed, dragging canola along behind.
At least four southeastern Chinese canola crushing plants suspended production last week because of a typhoon, according to Shanghai JC Intelligence Co., as reported by Reuters News Agency. That has caused Chinese vegetable oil stocks to become tighter.
The closures were in Fujian province but caused a rally further afield, with Guangxi and Jiangsu canola prices said to have risen four percent to about the $470 per tonne zone.
However, the closures hinder demand for raw canola exports because less crushing capacity is available.
Chinese vegetable oil demand is likely to remain strong and supplies tighter because the Chinese government isn’t expected to release any of its large canola stocks until next June, according to JC Intelligence.
Demand is also good outside of China with stocks declining.
“The big thing is that palm oil has been strong (with) good demand,” said Mike Krueger of the Money Farm in Fargo, North Dakota.
“The world vegetable oil situation just continues to tighten up.”
India has recently helped spur demand by cutting its duties on imported vegetable oils. Domestic production of palm and wheat has suffered from the weak monsoon.
However, Anderson said the steady Chinese demand has been central to the recent palm rally.
“Palm has been the lead. That’s Chinese demand,” said Anderson.