As of 11 a.m. CDT this morning, canola futures were trading at $920 per tonne.
That is $20.80 per bushel, and perhaps the highest price ever for a new crop canola contract.
At one point in the morning, canola briefly touched $949 per tonne.
Canola futures have exploded since last Friday as buyers have realized that 35 C weather and the drought across much of Western Canada could severely cut into canola yields this summer.
“The crop damage has really been done,” said Errol Anderson of ProMarket Communications in Calgary.
“We’re hearing that a lot of fields may only be 10 to 15 bushels per acre…. The market has to ration demand. There’s not enough canola for the crusher and the exporter. So, that battle has to unfold.”
Anderson, who has been following commodity markets for more than three decades, has never seen a canola futures market like this one. He described it as “highly unpredictable” because canola futures could trade in a $200 per tonne range of $800 to $1,000 per tonne.
“I really don’t know where they are going,” he said.
“I’ve heard talk where the November (contract) could go above $1,000…. And it may. We’re this high.”
The situation is uncertain because the November contract shot up this week, leaving a gap in the charts. When that happens, the gap usually gets “filled in,” Anderson said.
But it’s impossible to predict when that will happen. It could be tomorrow or it could be weeks from now.
New crop canola futures are in uncharted territory, thanks to a late June and early July heat wave that refuses to subside. Much of the canola crop is in bloom, or was flowering, and the oilseed cannot tolerate 36 C days and warm nights.
Layered on top of the heat, soil moisture is severely limited over a large area, leaving canola to bake in the sun.
It’s hard to know if the recent price spike is an over-reaction to the growing conditions or if there’s more upside for canola.
Anderson reiterated that the market is volatile and unpredictable, meaning anything is possible.
“There is still potential upside,” he said.
“To say we’re at the absolute top of canola, we don’t know that.”
What’s more obvious is that other canola- producing countries will benefit from Canada’s drought.
“What I’m sensing is that Canada, overall, will lose market share in the world,” Anderson said. “Just because we don’t have it. Places like the Ukraine and Australia are going to pick up share.”