Canola prices finished the month of September slightly in the green. Ongoing harvest pressures continue to complement concerns about a massive U.S. soybean crop and the ongoing glut of canola and soybean oil.
Before we jump into some of the supply and demand factors impacting canola prices, let’s take a look at futures contracts in the complex.
In the month of September, canola prices were 0.3% higher than where they finished August. They are also 1% higher than where we were at this time last year.
Canola prices in Q3 were down about 2% since Q2.
This month, Statistics Canada updated canola yields in the Great White North to 41.1 bushels per acre. This is up from the 37.5 bpa reported a few weeks ago in their first estimates of Canadian canola production.
If we account for StatsCan’s new production number of 20.99 MMT, and assume all other supply and demand factors stay the same, Canadian 2018/19 canola ending stocks would end up at 3.08 MMT.
That would be a big jump from the 1.25 MMT estimate in late August.
The uptick in canola output comes at a time that canola crush margins have been plunging.
Canola crush margins are sitting at their tightest levels in roughly a decade. With a trade battle ensuing between the United States and China, it’s not that hard to understand why. There is an abundance of soybean oil in the U.S., a factor that is keeping a lid on canola prices.
Last year, Canadian canola crush margins for November/October sat at $56.06 per ton. Last Thursday, those figures were sitting at less than one-third of where they were a year ago.
On Wednesday, Statistics Canada reported August crush numbers. The agency said Canadian crush margins dropped 11% month-over-month.
Looking ahead, a larger U.S. soybean crop, and margin pressures continuing to weigh on canola crush sector, it will be difficult to see a scenario in the weeks ahead that we test the $535 CAD / MT highs from a few months ago.
For our GrainCents readers, we’re watching a variety of factors that might affect canola prices: 3 are bearish, 4 are bullish, and 1 is noise.
(If you’re not familiar with what “noise” is, then we recommend you check out our GrainCents risk management process towards canola prices.)
This month, GrainCents investigated topics such as:
- Less Canadian canola production,
- Why canola prices will push higher, and
- Surprising results from the canola crop report.
For our GrainCents readers, we’ll be continuing to monitor the harvest progress, yield updates, and subsequent effects on canola prices very closely. In the month of October, we’ll continue to monitor harvest pressures, canola crush numbers, and broader expectations for the global crop.
If you want to be more on top of what’s happening in canola prices (and making more sense of grain markets), join us for your free trial at GrainCents.