The weakest canola price since 2020 appears to be helping to stoke domestic and export demand for the oilseed.
The crop year is young, but canola exports and domestic use are so far running at a record pace.
Exports stand at 1.676 million tonnes over the first seven weeks of the crop year to Sept. 22. That is more than double the pace of the previous three years and even stronger than the previous high mark of 1.361 millions tonnes at the same point in 2020.
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The vast majority, 96 percent, has gone out through Vancouver and Prince Rupert.
The weekly statistics from the Canadian Grain Commission also show domestic use at 1.528 million tonnes, topping the previous high mark set last year at this time by 14 per cent.
Monthly export destination data for the new crop year was not yet available from Statistics Canada.
I would not be surprised if we find out Chinese buyers were active in August and September, bringing in canola seed early to avoid potential disruptions if the Chinese government’s anti-dumping review leads to restrictions on Canadian product.
This early season strong demand helps to lessen the negative impact on prices from weak soy oil prices and the lowest crude oil price since March 2023.
However, the strong export movement was cut off last week when Vancouver grain terminal workers went on strike. The strike ended late last week with the signing of a tentative agreement, but if it had lingered on, it could have wiped out the early shipping season gains.
Labour disruptions across the economy could become more common as workers struggle to catch up with inflation. In the United States, longshore workers on the East Coast and the Gulf Coast were set to go on strike Oct. 1, after the Western Producer deadline. This will not affect bulk grain terminals, but grain moved in containers could be affected.
Looking out further in the crop year, competition from Australian canola might not be as aggressive as in the past year.
Canadian canola struggled in 2023-24 to compete against Australia in markets such as Mexico and Japan.
However, southern and southeastern Australia were hit by frost last week, a blow to crops already stressed by dry weather. Some canola was in flower.
It is not clear how much damage was done.
Before the frost, Australia’s government forecasted a 5.47 million tonne crop, down almost eight percent from last year, mostly due to reduced planted area. The carry-in to the new crop year was also expected to be down, leading to a 10 per cent decline in total supply compared to last year.
The government forecast that Australia’s exports would be 4.1 million tonnes, down 24 per cent from 5.4 million last year and down even more from the 6.4 million tonnes exported two years ago.
While competition from Down Under might be less, Russia’s rapeseed could be a problem.
Oilworld, the global oilseed analysis publication, said Russia’s canola crop is estimated at 4.9 million tonnes, up 700,000 tonnes from last year. It says China will likely import more canola from Russia this year.
Russia will likely ship little canola seed or products to Europe because of tariffs the Europeans imposed as punishment for the invasion of Ukraine.
European canola production is down this year, raising hopes that the European Union will buy Canadian product.
The European Commission estimates production at 18.4 million tonnes, down 1.3 million from last year. The U.S. Department of Agriculture estimates EU rapeseed even lower, at 17.65 million tonnes.
The supply of oil sunflowers from Ukraine is also much less this year.
The USDA forecasts the EU will import 6.6 million tonnes of canola seed, up from 5.46 million last year.
So the expectation that there will be a little less export competition from Australia and a little more import demand from the EU are positives for Canadian canola.
However, that does not outweigh the depressing effect of the low soy oil price, which has a big impact on canola.
This month, soy oil posted prices cheaper than palm oil, which is usually the least expensive edible oil.
A year ago, the soy oil export price at the Gulf of Mexico was close to US$1,600 per standard ton, while palm oil from Indonesia and Malaysia was slightly less than $900 a ton.
After a year-long decline, soy oil is down near $1,000. Indeed, most of the edible oils are within about $50 of $1,000.
The market expects ample global soybean and soy oil supply, and that is keeping prices down.
The only thing that could change that expectation would be a serious production problem in South America, where the next soybean crop will be planted in the coming months.
It is dry now in parts of Brazil, but this is normally the time when the rainy season begins. We’ll have to wait to see what develops.
