Polar vortex couldn’t stop canola’s climb to record price

Bitter cold Feb. 8-14 stalled Canadian grain movement and exports but it didn’t stop futures traders from pushing March canola prices higher.

On Feb. 18, the contract reached a record of $777.30 per tonne, topping the previous high set in March 2008.

The day before, Agriculture Canada published its monthly supply and demand estimates and it knocked down the year-end-stocks forecast to 700,000 tonnes, down 500,000 tonnes from its forecast the month before and the smallest since 2012-13’s 588,000 tonnes.

The prospect of running out of canola before the new crop is harvested has been driving the price higher for months.

But rising values didn’t seem to slow demand from domestic crushers or the export market, which were showing a voracious appetite and the railways were smashing grain movement records.

Or at least that was the case until week 28 of the crop year, the Feb. 8-14 period I’ve already noted.

It was likely the intense cold, caused by a polar vortex, that slowed movement. In the week on the Prairies, temperature highs struggled to reach the low minus 20s and nightly lows were in the minus 30-40s with the wind making it feel 10 degrees colder than that.

Vancouver also had a rare cold spell with freezing temperatures and snow that likely affected ship loading.

Producer deliveries of all grains in week 28 fell to 648,800 tonnes in the week, down from 1.473 million the week before, according to the Canadian Grain Commission. Canola deliveries fell to 263,100 tonnes, down from 485,900 the week before.

Terminal receipts of all grains fell to 525,300 tonnes, down from 785,900 the week before.

Total exports in the week fell to 660,400 tonnes, down from 922,000. Of that, canola was only 50,600 tonnes, down from 169,100 the previous week.

The cold also affected domestic crushers. Domestic canola disappearance fell to 178,200 tonnes, down from 201,400 tonnes.

Likely that was a one-week anomaly associated with bitter cold, although we must also monitor to see if higher prices are starting to ration demand.

In Canada, we are well aware that machinery does not work well when the mercury plunges, and that’s true even when we build for it.

Our neighbours to the south, who are much less prepared, have just received a devastating lesson about the cruelness of cold weather and the polar vortex.

As I followed the news about the Texas freeze and electrical grid failure and all the blame shifting, I noted some similarities to the situation here in Western Canada in 2013-14 when another polar vortex, coupled with inadequate railway infrastructure and staffing created a crisis in grain movement.

But the situation in Texas was made even worse because of the sharp divide in the United States, where any problem instantly becomes politicized.

It was dizzying how many directions the fingers pointed.

Liberal environmentalists were at fault because wind turbines froze.

Fossil fuel supporters were at fault because gas and coal plants also had failures related to the cold.

Conservatives were at fault because they kept the Texas grid separate from the other regional grids so as to avoid any federal involvement.

Ultimately, though, it was a system that failed when confronted by a rare, but not unprecedented weather event.

I hope that once the immediate peril is over and emotions cool, Texans can study what went wrong and collectively work toward solutions, as was the case in Western Canada with farmers, grain handlers, railways, ports and the federal government who came together to seek solutions. Not everyone was happy with what came out of the process but improvements were made.

Changes included amendments to transportation legislation, creation of ongoing monitoring and communications bodies and capital investments in new locomotives, grain hopper cars, distributed air braking cars and new sidings.

All this has helped make this year’s record grain movement possible.

We’ll see how the new system handled and recovers from this year’s polar vortex.

The prospect for a return to bitter cold is declining as we head into March so the potential for grain movement problems should decline.

But we should continue to make improvements.

Better grain movement monitoring and communication came in the wake of the 2013-14 crisis but Canada still does not have a sales reporting system.

It is good that Saskatchewan crop associations this year passed resolutions to press that the current review of the Canada Grain Act lead to amendments to allow for a weekly export sales report similar to the system in the United States.

That way farmers and the rest of the system would know not only how much grain has been exported but also how much has been sold for movement later in the crop year.

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