Grain Snippet: Canola Prices Fall with Crude Oil
The South Australian canola crop is looking exceptional at this stage following ideal growing season conditions. Timely seeding and above-average rainfall have advanced crop development, with some crops now flowering for more than a month. With an increase in planted area due to relatively high prices, strong gross margins and agronomic benefits of canola in the rotation, SA canola production is likely to exceed the 5-year average of 515kMT. 26/27 Australian canola production is forecast at 6.8MMT down slightly from 7.7MMT (9%) y/y.
SA new season canola prices have had a wild ride through July, with ISCC non-GM canola climbing to year high of $854/MT last Friday before plunging $47/MT to be at $807/MT on Tuesday 29/07/26. There were several factors lifting canola prices in South Australia. These included a rally in crude oil prices due to renewed conflict in the Middle East restricting oil exports through the Strait of Hormuz. The lift in crude oil prices had been supportive of biofuel prices.
The fall in canola prices can mainly be attributed to a sharp fall in crude oil prices following the announcement over the weekend by US President Trump of a pause in renewed attacks on Iran to have peace talks. WTI crude oil prices fell from US$92/bl on Friday’s to US79/bl on Tuesdays close a fall of US$13/bl (14%). If peace talks are successful, further downside in crude oil prices are likely to soften further, however the conflict is now entering its sixth month, so markets could remain volatile in the near term.
Providing support for canola prices had been rising biofuel prices which has been due to mandates by the US government to increase biofuel mandates for biofuel made from stock sourced in North America. This in turn had lifted US soybean prices and Canadian canola oil, as the US is the largest export destination for Canadian canola oil. An additional tailwind for North American oilseed is the trade’s presumption of China buying US soybeans for the coming harvest. China agreed to resume buying US soybean in trade deals struck with the US earlier this year.
Europe is a major destination for Australian ISCC canola exports, and the heatwave has negatively impacted European rapeseed production for this season. The EU also imports around 3MMT of canola seed from the Ukraine and this is being hampered by the increased hostilities between Russia and the Ukraine which is limiting exports via the Black Sea in recent weeks.
China continues to look to diversify its origination of canola seed imports to include Australia, with trial shipments carried out earlier this year. China sources the majority of its canola from Canada but is looking for alternatives as domestic Canadian crush demand increases to also supply canola oil to the lucrative US biofuel market, reducing Canada’s export supply.
This is a sample only, if you would like to view the entire document and our recommendations, please contact CloudBreak to discuss becoming a member on (08) 8388 8084.