Don’t look now, but canola futures prices have recovered most of losses experienced after the imposition of Chinese tariffs on Canadian canola oil and meal in March. Nearby canola futures are trading in the C$660 to C$670 per tonne range and is testing the recent highs posted in late February. Canola futures are trading close to C$40 per tonne above levels that were traded last year this time.
Cash prices for canola are also trading at levels close to the highs in February. The cash price is now trading between C$5 to C$ 15 per tonne above last year’s levels. The turnaround in the canola market has been remarkable given that most of the tariff threats remain in play. China could announce a tariff on canola seed any day, while United States tariffs are just a pen stroke away.
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The reason for the price recovery is mostly fundamental with tariffs having a minimal impact on canola seed sales to China. Canola products sales to the U.S. continue without any tariffs. Two months into the threat of tariffs and canola exports and crush continue without any slowdown in demand.
The canola crush through the end of February was 6.8 million tonnes, which is 400,000 tonnes above 2024 crop year levels. The February crush was slightly lower 2024 at 882,610 tonnes. Part of the reason for lower crush levels is the additional day in February 2024. The crush is still on track to positing a record year, despite the threat of tariffs and is well on its way to hitting the crop year forecast of 11.5 million tonnes by Agriculture and Agri-Food Canada.
Canola exports remain strong with the crop year total to date hitting 7.18 million tonnes which is the second highest export total in the past 10 years. The current export forecast by AAFC calls for crop year exports to hit 7.50 million tonnes. This estimate needs to be increased as hitting this estimate is certain, even if tariffs were immediately imposed. Exports during the week ending on April 6, were strong at 309,700 tonnes. Elevator and processor deliveries were also strong during the week with a total of 386,500 tonnes crossing the scales.
Managed money funds have also noted the changing fundamentals and bought back a total of 36,385 contracts (727,700 tonnes). The funds were still net short 32,057 contracts on April 1 but are rapidly moving to a neutral position in the canola market.
The strong demand for canola is driving the market higher, but the overall fundamentals in the vegetable oil market remain positive. Soybean oil exports from the U.S. remain strong with the Department of Agriculture increasing their estimate by 500 million pounds to 2.30 billion pounds. This is the strongest soybean oil export program since the 2019-20 crop year. Global soybean oil exports are forecast by USDA to be more than two million tonnes higher than last year.
The main reason for the exports is tightness in the palm oil market. Global palm oil exports this year are expected to be essentially flat at 44.20 million tonnes. The increase in global vegetable oil demand has left to alternate vegetable oils, especially soybean oil.
Canola is also helping to fill the gap with Canadian exports of canola seed increasing dramatically this year. Demand, not tariffs, is the key to canola markets in the coming months.
