When we started 2017, the canola market had recently seen some highs in November 2016 that most canola farmers were hoping would come back (as noted in the FarmLead 2016 grain markets recap).
They got lucky because in 2017 there turned out to be 3 (and arguably 4) other great opportunities to sell canola at the highs.
As we shifted into 2017, our grain markets forecast laid out nearly a year ago called for more Chinese and southeast Asian demand for oilseeds. However, we also noted that it would not be able to match bigger production in 2017.
More specifically, we were expecting palm oil production in the 2nd half of 2017 to increase, and indeed it did. In fact, the competition of vegetable oils got a little more aggressive in the 2H2017 as increased production started to create some substitution effects.
Finally, we suggested the following in our 2017 forecast:
“Those looking for those $12 CAD/bushel levels on their canola, I would put a 15% likelihood of that happening in 2017 (this means that it’s quite unlikely) as we expect values to dip back below $500/MT after June, especially considering the likely size of the 2017 U.S. soybean crop (another record).”
While the 2017 American soybean crop didn’t turn out to be a record, it was the second-largest ever thanks to surprising yields. Read the FarmLead 2017 Soybean Market Review here.
Unless you did some excellent basis-first grain-marketing, $12 CAD/bushel on the spot market was a rare sight to see in 2017.
Record Canola Acres Equals…
2016 wasn’t the greatest for cereal production in Western Canada because of the significant disease issues after wet rains.
Further, we saw a healthy pop in oilseed prices – including canola prices – in January 2017 and then again in March. We think this helped buy more canola acres in Canada.
Thus, it was estimated that a record of nearly 23 million acres got seeded in the spring of 2017.
Comparatively, Europe planted 16.65 million acres of rapeseed (albeit theirs in of the winter variety and got seeded in the fall of 2016). This, despite some of the political hurdles that EU farms are having to address.
While there is some debate on final numbers, it looks like European farmers will have harvested somewhere between 21.5 – 22 million tonnes of rapeseed.
The big surprise out of Europe though was Ukraine’s 2.2 million-tonne crop. That doesn’t seem like a big number but thanks to better yields and acreage expanding by 34% year-over-year, production was nearly double what it was in 2016/17!
In Canada, by the time farmers put the combines away, StatsCan thinks that a record 21.3 million tonnes of the farming black gold was in the bin. The USDA is a little more optimistic, pegging things at 21.5 million tonnes. The bigger-than-expected crop does mean a bit bigger Canadian canola carryout though, despite some stronger demand.
Can Strong Demand Equal Higher Canola Prices?
Canola tends to follow palm oil prices in Malaysia or soybean/soybean oil prices in Chicago, depending on the day.
Over the course of the 2017 growing season though, more North American production concerns were being priced in, thanks to the dry conditions in Western Canada. This created the perfect opportunity to “sell on the rumor and profit on the fact” ”
More specifically, canola prices on the Winnipeg ICE futures board hit nearly $540 CAD/metric tonne for the November 2017 contract. While everyone was noticing that rally, we looked beyond to the January 2018 contract, which popped up to $580!
If you wanted to lock up $12 CAD/bushel, this easily your best opportunity in 2017.
If you didn’t, it’s a reminder that the most nearby contract/delivery period doesn’t always mean it’s the best opportunity.
Canola prices have weakened towards the end of 2017 as a strong Canadian Loonie has put some pressure on international purchasing power. However, Canadian canola exports through Christmas of 4.21 million tonnes is about 10.5% above where they were a year ago.
The good news is that China’s rapeseed/canola demand is unrelenting (as discussed in GrainCents).
Conversely though, one of the negatives though was that India introduced new import taxes on crude and refined vegetable oils.
What Now for Canola Prices in 2018?
Next week, we’ll be releasing our 2018 canola forecast to subscribers of GrainCents.
Our price outlooks, trends, and forward-looking, actionable insight will allow you to start penciling in gains and prepare yourself for selling opportunities where others are not looking (i.e., locking up the January 2018 contract, as discussed above).
This 2018 canola forecast alone is worth more than the $400 USD annual subscription to GrainCents. If you think about it, just 15 tonnes of canola locked up on the January 2018 contract instead of the November 2017 contract this past summer would’ve paid for your GrainCents subscription).
Ultimately, this is the best way to accelerate your grain marketing plan in the New Year.
In GrainCents right now, there are 8 different factors that we have identified as either bullish, bearish, or just noise for canola prices. We also identify in GrainCents what percentage you should be sold on your 2017/18 old crop canola, as well as where your sales should be on your 2018/19 canola crop.
In addition to daily insight on prices and grain analysis, you’ll get our 2018 canola forecast. Or bundle the canola outlook with another crop category like spring wheat for a discount (and get the 2018 spring wheat forecast as well!)
Save money and take your grain marketing to a new level.
The 2018 canola forecast will be available next week to subscribers of this exclusive service.