THE canola market has been on fire for the past two years.
More recently, we have seen a major decline in pricing - at EP3, we have pointed out for a long time canola at about $1000 per tonne was not the new floor.
Prices were going to move back closer to longer-term averages.
Chart 1, above, shows the spot canola prices for a selection of Australian ports and the futures markets.
We are well off the highs.
If you forget the past two years, we are looking pretty.
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One thing to note is that Australian values are discounted to Canada.
In the years up to 2021, Australian values would typically be at a premium.
If Canada has a large crop, and Australia moves back to more normal production levels, then we could see Australian prices return to a premium over Canada.
Canada is the biggest exporter of canola in the world and what happens to its crop will have a direct impact on our pricing.
If Canada has a drought, we are in for good times - and likely vice versa.
Chart 2, below, shows the updated acreage for Canada and it is sitting just above the long-term average at 8.7 million hectares.
Chart 3 shows the rainfall for Saskatchewan, which is currently below average.
The crop is primarily made in May and June, so we will keep an eye on the weather there.
