CANOLA is currently trading at around $530 a tonne delivered port but rumblings on the international scene suggest there is the prospect of a price hike before the Australian harvest.
Already, canola premiums to soybeans are at historic highs and the market is closely monitoring crop prospects in both Canada and Australia, key exporters of the oilseed.
There was a $14 a tonne increase in international canola prices early this week, in spite of falls in soybean values.
Influential market analysts Oil World have identified a ‘potentially explosive’ situation in the canola / rapeseed complex due to dry Australian and Canadian conditions.
In a recent report Oil World warned Canadian canola production may dip below 18 million tonnes, a three year low, well below US Department of Agriculture projections of 20.5mt.
The immediate weather forecast is for warm conditions through the key Prairie production zones, with little rain on the horizon, placing further pressure on the crop.
However, Pierre Colinet, Cargill Australia said there would be compensation in world production from areas such as the EU and the Black Sea, which are both on track to record improved crops.
“Overall global production should be larger in 2017-18, which may result in price pressure for Australian canola,” Mr Colinet said.
He also said the high Australian dollar was a headwind to domestic canola values rising.
Jon Slee, president of the Australian Oilseeds Federation (AOF) said falling soybean values would also put pressure on the oilseeds complex.
“The spread may come out a bit but soybean stocks were bigger than anticipated in the USDA report and that puts pressure on pricing.”
Mr Slee also said there was a similar story in palm oil stocks, which were also lifted.
“That is another competitor to canola, so again it is a factor to consider.”
In the canola space, he said the estimates were generally getting smaller due to the Canadian woes.
Domestically, he said the biggest question was over NSW and WA.
“Rain has certainly helped these areas, we probably need to let things settle before we can really see how the crop responded.”
Nick Goddard, executive director of the AOF, said the last AOF Australian canola crop report had cautioned the market regarding dry conditions, although the actual numbers then were seen as being on the high side by other commentators.
He said with another report due out at the end of the month, the impact of the rain would likely be to keep the AOF estimates steady at 3.3mt.
“There’s a lot of factors at play, the Bureau of Meteorology (BOM) is still forecasting a drier than average spring for many places, which would be tough for those with late crops, but equally the rain has bought a little bit of time for many growers.”