Canola prices have held their ground, thanks to bustling export sales and a rapid crushing pace here at home.
Exports this year are up more than 80 percent from last year, and crushers have put more than one million tonnes of seed through their plants so far.
“Canola is just fairly valued right here: It’s not expensive, and it’s not cheap,” explained Paul Erickson, canola trader for Linnco Futures Group.
Canola prices are attractive relative both to world oilseed prices and to oil and meal prices, said Erickson, adding demand from China has been important for both seed and oil prices.
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Joachim Toens, senior trader for Xcan Grain Pool Ltd., said China may buy 1.8 million tonnes of canola this year, with one million tonnes coming from Canada.
“This Chinese demand has propelled the prices higher,” Toens said.
China had a “disastrous” rapeseed crop this year, with extensive flooding destroying some crops. The Chinese government is also trying to crack down on oil smuggling, leading to more seed imports.
Mexico has also been buying canola.
“I think the market starts to realize that we will have a pretty tight carry-out in Canada,” said Toens. “Despite having a record crop, we might have the lowest carryout ever.”
Demand from crushers is as high as it has ever been, said Erickson.
“The margins are very good.”
The weakness in the Canadian dollar has allowed canola prices to rally to keep in line with world prices, said Erickson. And farmers are holding out for higher prices on what canola they have left on their farms.
This made some grain companies bid up to $9 per bushel last week in Saskatchewan for delivery in the summer, said Erickson.
Charlie Pearson, of Pro-Ag Strategies in Calgary, said the strong export program has been helped by farmers who needed to sell canola to get some cash flow this fall.
“They’re probably at a stage right now where they can sit back a little bit. The bills are paid, operating loan is down, and they’ll probably start to get a little more sticky with the stuff they’ve got left over in the bin,” said Pearson.
Holding remaining supplies into late winter or spring may be a good strategy, he said.
“Canola is still a pretty perky market. There’s still lots of potential opportunities here,” said Pearson.
He is watching the Canadian dollar for clues to future canola values. Every penny it loses, canola gains $6 to $7 per tonne, other things being equal. If the dollar breaks below the 64-cent U.S. mark, it could move substantially lower, helping canola prices move up, said Pearson.
Commodity funds have also been buying canola futures, making prices rise, said Toens: “The charts look beautiful.”
But when technical indicators point down, funds will sell, pushing prices down, cautioned Erickson.
“Then it (the drop) will be swift and quick.”
