SYDNEY, Australia – Tight world canola supplies and a rollercoaster weather ride are producing a nail-biting boom for Australian canola producers.
Australian cash canola prices have leapt to a record high of almost $470 Aus a tonne in the past week, before settling back to around $450 Aug. 17. Talk is rife of $500 a tonne. The Australian dollar is worth about 81 cents Canadian.
But growers are more stressed than their drought-frazzled crops.
Price increases would be a disaster for growers who forward sold but had crops destroyed by drought at the end of the season.
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“Farmers are getting very cautious of going too heavy or too strong with their contracts,” said Paul Parker, secretary of the Canola Association of Australia.
Some growers are even buying back contracts at present prices from fear of being unable to supply, and to guard against further price gains.
This topsy-turvy situation has been produced by fears that this year’s unpredictable weather may destroy crop tonnages in a dry finish to the growing season. Rain recently rescued Western Australian crops but drought plunged other areas of the national crop into a new crisis.
Australia’s variable weather has been superimposed on drought in Canada’s canola belt and a heat wave in the United States soybean area.
In Australia, the canola association shaved its forecast of the national canola crop to 1.39 million tonnes from its forecast a month earlier of 1.43 million tonnes. This was well down on the 1.68 million tonnes produced last year.
Good rain in Western Australia revived the crop, but now, “the whole of southern New South Wales … is sitting on a knife edge, although as you go east, the knife’s a bit blunter than it is out west,” Parker said.
If rain does not fall in about seven days, yields in that state would drop dramatically. If it does rain, yields would increase, he said.
The canola association is forecasting production of 570,000 tonnes of canola from NSW this season, down from 608,000 tonnes forecast a month ago.
A slight recovery by the Australian dollar has pushed prices down slightly, with every one cent rise in the currency causing about a $5 a tonne drop in the canola price.
The latest forecast also took some of the sting out of the market, although Parker believes the decisive influence on canola prices is North American markets.
Meanwhile, Australian canola farmers are out of the market.
Much of the Australian crop, particularly from NSW, has not yet been contracted because of price volatility and fears by farmers over dry conditions, Parker said.
The general view is that canola prices had neither a great deal of upside or downside, with the finish to this year’s crop in NSW the vital ingredient, he said.
