Canola’s price premium over competing soyabeans could grow even further due to dry weather in both Australia and Canada, according to the Commonwealth Bank of Australia (CWBA).
According to Tobin Gorey, director of agri strategy at CWBA, canola futures at the Winnipeg Commodity Exchange (WCE) closed at C$506.7 (US$402.6)/tonne on 18 August for November delivery, signifying a premium of US$58/tonne over corresponding soyabean contract at the Chicago Mercantile Exchange (CME), reported Agrimoney.com on 21 August.
The closing premium marked a US$22 increase from the US$36 premium at which canola stood in July and its lead could still grow if the dry conditions in the top two canola exporting countries – Australia and Canada – continued, based on the news outlet’s calculations.
“The November spread had traded into the US$70 area per tonne in August in the past so we are not outside historical experience – yet. Canadian and Australian weather might easily take a path that sets a new high for the spread,” Gorey told Agrimoney.com.
He said farmers the New South Wales and Queensland regions Australia had some hope for rain at the end of August, but the “event is too fuzzy and too far away to move it from ‘possible’ to ‘probable’”.
Projections for the Australian canola crop were also coming down, ranging from the estimated high of 3.20M tonnes by the US Department of Agriculture (USDA) to the low of 3.12M tonnes by the Australian Oilseeds Federation, averaging an approximately 23% decrease from last year and 16% from the five-year average.
In Canada, Gorey said the lack of rain was making prairie crops suffer and the problem was spreading east- and northwards from the dry centre in southwest Canada.
In mid-August, 56.6% of the province of Alberta’s canola crop was rated to be in a ‘good’ or ‘excellent’ condition, significantly down when compared to the 82.5% figure year-on-year.
Estimates from Statistic Canada showed the country’s canola crop to reach 18.6M tonnes, only slightly above 18.42M tonnes last year despite a record sowing.
Canada’s agriculture ministry put its estimates at a more optimistic 19M tonnes, while the USDA expected an even larger 20.5M tonne crop.
However, other agencies – including Oil World and business analyst Lanworth – projected the crop to remain much lower at around 18-18.4M tonnes.