An eventful week for Canola
- By: "Farm Tender" News
- Cattle News
- Apr 04, 2019
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There has been some useful rainfall in many areas of NSW and QLD over the last couple of weeks which has given pause to growers finalising their seeding plans this year. While sub-soil moisture levels are still well below desired amounts, the rain has caused more growers to give canola a closer look for this year’s program. Given the patchy totals, it is clearly a region by region proposition but further rainfall could make things a lot more interesting. There is still plenty of time for decision making so keeping your options could be wise.
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Last week, new crop wheat, barley and canola were priced around $330, $275 and $570/tn respectively in Port Kembla track markets. While wheat and barley prices have significant feed premiums included, even the canola price represents a decile 8 price, which is hard to ignore. From an old crop perspective, the flow of canola from Western Australia has clearly put a top in the market and more surprisingly, there was even a boat load out of Victoria. For the time being there appears to be a standoff between the domestic crusher and the grower and what feels like today will be the only thing to end this stalemate, is time.
It got more interesting last week after Chinese authorities banned a second major Canadian company in Viterra from shipping canola seed to China. This followed moves earlier in the month by Chinese customs authorities revoking the licence of Richardson International. China alleges Canadian canola contains ‘harmful organisms’ and pests in shipments. Time will tell if the ban spreads to other Canadian exporters. While the Canadians would like to resolve the dispute shortly, that would seem wishful thinking and it is likely they will look to other markets. Canada is the largest producer of canola in the world, growing more than 21 million metric tonnes out of a global production of around 28 million metric tonnes in 2018. According to the Canadian Canola Growers Association, they shipped $5 billion worth of canola last year, with half of that going to China.
The effect on Australian canola isn’t clear as yet but the market hasn’t reacted significantly. Given the season, the focus for the market remains domestically driven and with domestic demand about half of last year’s production, there probably isn’t a lot of surplus to export. Additional export opportunities out of Western Australia should be considered in the context of prices in the EU, which are currently more attractive than current price levels in China. It should also be noted that Canadian canola has no bonifications/bonus on oil quality and Asian buyers are not used to paying oil premium, which is not the experience in Australia.
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If you are looking to manage your price risk and contain your costs, then a contract may be the way to go. There is a steady, and growing, domestic demand for specially bred high oelic canola customers in Australia and growers can write contracts for hectares committed. Attractive seed prices and premiums are a feature of these types of programs. The window for these contracts typically close this time of year.
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