It's been a time that canola growers won't soon forget, says a provincial crop analyst.
"Producers with unpriced canola remaining after the 2020 harvest have been delighted and amazed by the price increase since harvest," Neil Blue said in a recent Agri-News article.
"New record canola prices have been set for both futures and cash."
After breaking the $700 per tonne mark earlier in the year, the futures price for canola has kept on climbing. ICE May canola closed the week ending April 23 above $877 per tonne and new-crop November canola closed at just under $694.
"Canadian canola demand has also been spectacular," said Blue. "Canola exports are record-high for this time in the crop year."
As of mid-April (Week 37 of the crop year), bulk exports of canola from Canada had shot past the 8.8-million-tonne mark — more than a million tonnes above last year's pace. And domestic canola crushing is keeping up with last year's record level.
And the amount of crush seems certain to go up in the years ahead.
Federated Co-operatives plans to build a renewable diesel facility in Regina that will use one million tonnes of canola oil once it is built and in operation in 2025. And both Viterra and Cargill recently announced plans to build new crush plants in Regina — the former able to process 2.5 million tonnes annually and the latter one million tonnes a year. (Cargill will also "update and modernize" its Camrose facility over the next 12 months.)
In the shorter term, tight supplies are likely to be the story.
Subtracting export and crush deliveries this crop year from last year's production and carryover leaves a very small amount of canola left to sell, Blue said in the mid-April article.
"If the 2020 carryover and production numbers are correct, that leaves about 6.55 million tonnes left in farmers' storage, with 17 weeks remaining in this crop year," he said. "That is an average of 385,000 tonnes per week, and remaining canola stocks will not drop to zero."
The function of price is to meter supply out to the demand and rising prices tend to discourage demand to prevent a shortage of product, he added.
But the market is cutting it close.
So far this crop year, farmers have delivered an average of 440,000 tonnes per week for export or crushing — and that went up to 482,000 tonnes a week during the first half of April, he noted.
"Despite the historically high canola prices, forward crusher margins are reportedly still very profitable," said Blue. "Meal prices have retreated since the highs in January, but vegetable oil prices are still high."
Vegetable oil prices may drop with the expected increase in palm oil production and price. However, Blue points out two unknowns that may affect prices: Remaining crusher demand to fulfill forward bookings of canola product sales, and remaining canola export demand for the balance of this crop year.
"Also subject to adjustment is the size of last year's canola crop and how much canola goes to the feed and waste category," he said. "Crop year-end canola stocks are setting up to be the smallest in years."