Recent nosedive linked to improved weather conditions on Prairies and fund investors reducing their long positions
The canola market has likely peaked and will not fully recover from last week’s carnage, says an analyst.
“Both Mike (Jubinville) and I feel that it’s going to be very, very tough to get back to the previous highs right now,” said MarketsFarm analyst Bruce Burnett.
The November canola futures contract plummeted almost $200 per tonne between June 1 and June 24, an 18 percent drop.
Prices rebounded $19 per tonne on June 27, but nothing close to addressing the massive market correction that took place last week.
Read Also
Dry bean seeded acreage in Manitoba hits 20-year high
Dry bean acreage across all types reached around 207,000 acres in 2025, representing a significant increase from last year’s 182,000 acres.
“I don’t know if we’ve ever seen a drop quite that large in that short a period of time,” said Ken Ball, adviser with PI Financial.
It took about a month and a half for the market to fall that much after the 2008 highs.
Good weather conditions in Western Canada, with the notable exception of the water-logged regions of Manitoba and eastern Saskatchewan, likely got the ball rolling.
“Canola is generally off to a uniformly excellent start on the Prairies, probably better than we’ve seen for quite a long while,” he said.
Burnett attributes the freefall to another factor.
“This was more the funds getting out of Dodge,” he said.
“That was part of this whole carnage that we saw.”
Managed money reduced their long position by 6,889 contracts in the June 21 weekly Commitment of Traders report compiled by the United States Commodity Futures Trading Commission. They also added 429 short contracts.
Burnett doesn’t think that situation was unique to canola. Funds are reducing their long positions in a lot of commodities.
Ball agrees that was a key factor. Soaring interest and inflation rates, falling stock markets and the general unease surrounding the war in Ukraine has made the funds anxious.
On top of that, there has been some “predator selling” where the shorts in the market sense that the longs are under pressure and are selling to drive down prices even further.
Ball thinks the pendulum may have swung too far as it often does when money rushes in or out of commodity markets.
“Canola is now just insanely attractive to crushers or any commercial buyer,” he said.
“It’s probably cheaper than it deserves to be.”
His crush margin index late last week was at $205 per tonne, up from $25 per tonne in April. That means canola seed values have dropped $180 per tonne more than oil and meal values.
“That’s dreamland for a crusher. That’s actually fantasyland,” said Ball.
Burnett said the ICE canola contract likely took some of its cues from the Paris rapeseed November 2022 futures contract, which has fallen 13 percent since June 1.
Strategie Grains is forecasting 18.3 million tonnes of European Union rapeseed production, about one million tonnes more than last year. Harvest starts soon.
Canadian canola prices are transitioning from old crop to new crop, and he agrees with Ball that new crop prospects are vastly improved from last year with the drought lifted in most canola-growing areas.
Prices have dropped but they are still close to $20 per bushel, which is sensational from a historical perspective.
Burnett said prices will be largely weather dependent from now until the end of harvest. They could rally if conditions take a sudden downturn in July or August or there is a surge in demand forcing the commercials to buy more.
Ball concurs that weather will be the big determining factor from here on out. There are going to be some lost acres in the eastern Prairies but he recently spoke to growers in Alberta who are thrilled with the change of fortunes in their province.
“They’re talking already about getting back up into some of those big, booming 60 to 70 bushel per acre yields,” he said.
“But they still have a long way to go.”
