THE canola market has come under a lot of pressure in recent weeks.
Prices around the country have experienced a step-down change.
Let's look at some of the drivers.
The Canadian crop has improved massively since last year when their drought robbed them of most of their potential.
This year conditions, while not always ideal, have improved, and now production is expected to rebound.
Chart 1 shows Canadian production since 2000 and the industry expected forecast for this season.
The EU has also released their latest production estimates.
Despite the recent poor conditions, they expect production to achieve 18.8 million tonnes.
This would be the highest production since 2017 and comes from higher yield estimates (refer to chart 2).
This explains a large proportion of the fall in canola pricing in recent months, along with the wider macro environment (crude oil).
High prices are the cure for high prices.
Farmers have switched to oilseeds where possible to capture the prices on offer.
For example, Europe had their highest oilseed acreage since at least 2010.
The reality is that prices achieved last year were not the new normal, which we have been discussing for quite some time.
When we delve further into Australian canola pricing, we can see that our pricing levels for new crop have been falling at a faster rate than overseas values (chart 3).
This has meant that our basis to MATIF (France) and ICE (Canada) has fallen at a sharp pace (Chart 4).
The biggest change has been in WA, which is predominantly export-orientated, while the east coast was already at hefty discounts.
The west has just waited a while.
Australian canola prices have been discounted for much of the past season and this pattern is continuing into the new crop.
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