Canadian oilseed crushers are so concerned about tight supply at the end of the crop year that they have bought two shipments each of up to 30,000 tonnes of canola from Ukraine for delivery in August.
I can’t remember that ever happening before. The news reported by Reuters came last week as canola May futures soared to new record highs, nudging briefly past $20 per bushel.
Hard to believe that in April last year the nearby futures price was only about $10.50.
Of course, the current high prices for old crop are only a spectator sport for most growers. The reason the price is so high is that there is very little left.
The shortage of canola seed is a key market driver but so is the price of vegetable oil, which was on a real tear in recent days.
In the two weeks of April 12-23, July soy oil soared 18 percent, July canola climbed 12.4 percent, soybeans 9.9 percent and soy meal 4.85 percent.
The rapid roll out of the COVID-19 vaccines in the United States and the concurrent relaxation of restrictions on dining out is contributing to the latest rally in soy oil. Foods consumed at fast food outlets and restaurants tend to use more vegetable oil than foods consumed at home.
Also, the amount of vegetable oil going into biofuel around the world is increasing.
The rising oil price helps to keep crush margins strong, meaning domestic crushing plants will be keen to maintain production, and that’s why it was economical to import seed from Ukraine for August.
Last week’s price rally was not limited to the oilseed complex.
In the U.S., the battle for seeded acreage between soybeans and corn is in full swing. The demand prospects for both are strong and both will have tight ending stocks at the close of the current crop year.
China imported much more corn than expected in the current crop year and there were rumours last week that it might be already placing orders for new crop. China already bought new crop French wheat.
In a year when everything has to go right to get a crop that will restore supply to more comfortable levels, the weather is not co-operating.
Freezing temperatures last week stretched down as far as Texas, raising worries about damage to American winter wheat and also the small amount of newly seeded corn and soybeans.
The cold also likely hurt winter-seeded canola in Kansas and Oklahoma but that crop has fallen out of favour in the region and won’t have much impact on U.S. supply. Only 22,000 acres of winter canola were seeded for this year, down from 117,000 in 2018.
Large parts of the Dakotas and Canadian Prairies are in drought and it’s dry in northern Iowa. While showers, or even more snow, are always possible, the trend in the longer term forecasts into May do not show a major reversal to above-normal moisture.
In Europe, France suffered damaging spring frosts and April was drier than normal.
It was also drier than normal in much of Brazil, stressing its second corn crop, which was planted late because of delays harvesting the soybean crop. The second corn crop accounts for about three-quarters of Brazil’s production.
There is concern about potential tight corn supplies in Brazil because a lot of crop has already been exported, strong demand from the livestock sector and because of worries about yields in the second corn crop. This has caused the government there to suspend its import tariff on corn and soybeans, opening the door to the potential corn imports from the U.S. or Ukraine.
Also, it looks like early expectations that Russia’s wheat crop came through winter better than expected might have been overly optimistic.
Russian agriculture consultancy IKAR last week downgraded its forecast for Russia’s 2021 wheat crop to 79.5 million tonnes from 81 million previously. That would be down from 83 million tonnes last year.
A lot of the crop was seeded into dry soil and some of it did not survive the winter.
But winter wheat is resilient and final production, in Russia and in the U.S., depends a lot on the weather from here on.
While we’re on Russia, it was good to see that last week it ended its build up of troops on the border with Ukraine. The aggression was seen as Russian President Vladimir Putin’s effort to shore up sagging popularity at home and to test the resolve of new U.S. president Joe Biden.