Grain Snippet: Crude Oil Lifts Canola Prices
Global oilseed futures prices have experienced extraordinary volatility, being led by crude oil prices. Around 30% of global oilseed production is used to manufacture biofuel, which competes with diesel and petroleum. Rapeseed is used for in the EU for ISCC biofuel manufacture and the EU is a major export market for Australian non-GM canola. Other oilseeds such as Canadian canola US and South American soybeans and Indonesian palm oil are all feed stock for biofuel production.
Crude oil prices had been trending higher from the beginning of the year and rallied strongly from the 28th of February following US and Israeli attacks on Iran. The conflict then escalated and spread through the Middle East following retaliation from Iran on a number of countries in the region. With the Iranian military block the Strait of Hormuz and attacks on Iranian oil depots, crude oil prices rallied nearly US$40 per barrel on Monday 9th March to just shy of US$120/bl before comments by US President Trump that the conflict would end soon which saw the market pull back to US95/bl. The following day, additional measures were announced to free up supply which has seen crude oil prices retreat to US$83.50/bl.
On the back of the rally in crude oil following the initial strikes, EU rapeseed futures also lifted €37/MT (A$60/MT) to a 12-month high of €524/MT on Monday before pulling back to €501/MT on Tuesday 10th March. The lift in EU rapeseed prices has barely flowed through to Australian canola prices which lifted only $20/MT for the same period.
South Australian canola production rebounded in 25/26, with production estimated at 507kMT, up 155kMT (44%) on the drought impacted 24/25 season and returning to the 5-year average. The area seeded in 25/26 was slightly below average at 226,000ha, however a cool and late wet spring led to above average yields, good quality and higher than average oil, particularly in the higher rainfall regions. Australian canola production also lifted in 25/26 with ABARES estimating a 7.7MMT crop up 1.3MMT (20% year-on-year and the second largest on record (against the 8.4MMT in 22/23).
Globally, canola and rapeseed production also increased in 25/26 with the USDA estimating record breaking production at 95.5MMT, up 11% y/y. The bulk of the increase was due to improved growing conditions in Europe, Canada and Australia. On the back of the improved global production, canola stocks have increased and the stocks-to-use ratio has loosened from 7.4% in 24/25 to 11.2% in 25/26, which had weighed on canola and rapeseed prices following the northern hemisphere harvest finding a bottom in late December. Europe and Ukraine harvest rapeseed in June through August and Canada from August to October.
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